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| Tin packaging industry to grow 50% amid slowdown | |
| Dilip Kumar Jha / Mumbai November 27, 2008, 0:46 IST | |
The Rs 3,000-crore tin packaging industry is likely to grow at 50 per cent this year and over 30 per cent next year on rising demand of steel and aluminium cans from the food processing industry. Metal packaging forms about 10 per cent of the country’s Rs 30,000-crore packaging industry.
According to government estimates, the country processes only 2 per cent of the total agriculture produce which is targeted to reach 10 per cent by 2015.
Due to growing health concerns in the packaging of processed food items, the government has attracted foreign direct investment worth crores of rupees in processing of food which requires metal cans for long shelf life.
Hence, the industry will continue to grow because of the government’s emphasis on this sector, said Sanjay Bhatia, vice president of Metal Container Manufacturers Association and managing director of Hindustan Tin Works and Rexam HTW Beverage Can India, the country’s largest tin can manufacturer.
But the recently-announced 5 per cent import duty on specialised steel may hit the industry hard as metal packaging sector is, currently, going through a difficult phase of 60 per cent hike in tinplate prices, the raw material, so far this year.
Cheap imports from China are also giving stiff competition to the domestic sector, thereby squeezing margins.
The specified items that have been slammed with the import duty includes tinplate used for manufacturing cans by the food and beverage industry for packaging. Rexam HTW Beverage Can, a joint venture between Rexam of the UK and Hindustan Tin Works with equity participation in the ration of 51:49, is facing huge escalation in prices of raw materials because of rupee depreciation.
The company imports 100 per cent raw material from the European countries therefore, any change in rupee behaviour against dollar, affects its strategy.
“The metal packaging industry would be the last to be hit by the global economic slowdown. But, if the downturn stretches for a year and more, then our workability would be hit badly,” said Atit Bhatia, vice president, Business Development, Rexam.
Apparently, Arcelor which supplies specialised tinplate to Rexam in India has hinted that it would raise the price further to $1,300 a tonne from the existing $800 a tonne now, which is again a problem for the industry. The packaging steel suffers a virtual monopoly scenario in the country and certain categories of tinplate including DWI (draw wall iron) tinplate steel used for beverage cans, are not produced in India. Therefore, local can manufacturer is dependent on imported steel for catering to the Indian market.
Overall, companies like Tinplate Company of India (TCIL) and Steel Authority of India (SAIL) meet about 45 per cent of the total 400,000 tonnes tinplate require for can manufacturing while the remaining 55 per cent is met through imports from Europe and the US.
Moreover, the rupee has depreciated over 20 per cent this year resulting into a further pressure on margin. All these extra costs cannot be passed on to consumers as they would start opting for cheaper substitute which would not be good for the industry, said Atit Bhatia.
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