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A character of steel

From the Hazardous Cargo Bulletin, January 2002

The steel drum is a design classic. It has both form and function and is an image that permeates everyday society as much as it is part of the scenery in industry. On the street, a steel drum might form the base of a temporary traffic light. The land-artist Christo (who wrapped the Reichstag in Berlin) has stacked them in his sculptures. In industry, the steel drum can be seen as a symbol of the half-a-century that has witnessed the United Nations evolve and expand, and where industrial packaging has mutated into a diverse family of many different shapes, sizes, forms and materials.

Having heritage and staying power thus far does not necessarily guarantee its future. While there will be markets for steel drums and steel drum reconditioning, there is a tendency for them to stagnate, especially as the world faces recession.

US against them

Since September, industry has been having an especially tough time in the US. Disruption of transport into, out of and across the US has affected business and many steel drum customers are losing money. Companies will have to consider the long-term viability and marketing of their products in 2002. Raw steel prices are set to go up during 2002 in the US, as plans for government trade restrictions on foreign steel indicate.

Skolnik Industries has continued to capitalise on being a manufacturer tailored to small niche markets in the areas of specialised chemicals, dangerous goods transport and long-term storage of dangerous goods. "These markets are particularly difficult to access as they require quality assurance programs that exceed the conventional ISO 9000 parameters," president Howard Skolnik explains. "Furthermore, these are markets that are predominantly devoted to metal packaging and need the strength, durability and consistency that metal packaging affords."

Since September 11, safety has been a bigger issue for many involved in dangerous goods transport. "Increased security and the need to reduce in-transit risk has supported the Skolnik position to make containers more than marginal," says Skolnik. "We see customers wanting to be sure that their containers will reach a destination safely, and are willing to justify the need for some extra precautions during shipment."

Skolnik recognises that "the events of 2001 have left us in a world of great uncertainty". His motto for 2002 is "steady as we go!" Seeing price reductions as a "dangerous way to temporarily attract business," which can mean the imminent end to a viable company, Skolnik is placing the onus on building customer relationships to better business.

Using the internet, voicemail, email, messaging and conference calling, Skolnik is developing the company's reputation for building the thickest, heaviest and strongest steel containers in the industry. With this strategy in place, Skolnik plans to secure his company's growth in the coming years.

Great Western Containers (GWC) manufactures steel drums and supplies a variety of other industrial packagings to customers. While revenues have increased by ten per cent on 2000's figures, steel drum markets are stagnant, according to Nils Bodtker, the company's president. What is worse, he says, "predatory pricing policies" from larger competitors in the steel drum market are posing a challenge to business. Profits in this sector have been affected, but Bodker is determined to "fight, fight, fight". Reluctant to cut costs by thinning drum walls, as the company also reconditions drums, Bodtker is looking to succeed by defending GWC's market share - "and servicing the 'heck' out of existing customers" he adds. Bodker says that the steel drum industry will continue its lethargy into 2002, but expects the rest of his business to grow by between ten and 20 per cent in the course of the year. This will be aided by the current market strength based on the buoyancy of the oil and gas industry.

Ronald Evans, president of Evans Industries, says that while steel prices are low at the moment, allowing steel drums to compete more effectively with other forms of industrial packaging, the general business slowdown and very competitive prices are having a negative effect on business. The company is countering this by taking a more aggressive approach to the sales and marketing of its products and services in order to overcome the tough climate. Evans Industries has benefited in the past year from the sale of two manufacturing plants in Columbus, Ohio and the consolidation of its reconditioning operations, which took place last year. The company has also entered into the sale of intermediate bulk containers (IBCs) as a new source of income. 2002 will see further growth in the company's new and reconditioned drum business, the IBC sector and in Evans' industrial packaging services, which include contract filling, warehousing and distribution and vendor management services.

Myers Container has employed e-commerce in building business this past year. Based on the company's on-line ordering capabilities, Myers was recently awarded a contract with the US government as its prime vendor for containers, reports Kyle Stavig, vice-president for sales and marketing. The company currently has over 40 customers on-line and further electronic technology is set to sweep across business in the coming year, says Stavig. While the company is performing well on a virtual plane, the real problem of empty drum disposal remains the 'Achilles Heel' for the steel drum industry, according to Stavig. "We continue to take back containers in our reconditioning business but we no longer offer money for the raw material," he says. "This may change in 2002 as market conditions will push new steel drum prices higher, allowing reconditioned units a better chance in the marketplace." Stavig is anticipating a significant restriction on foreign steel and predicts ensuing price rises of between five and ten per cent in line with this.

The company has invested in the reconditioning side of business, extending its repertoire to process intermediate bulk containers (IBCs) and plastics drums as well as the original steel drums. "Our future depends on diversification," concludes Stavig.

Around the world

Away from the US, the steel drum industry is not under such direct pressure. The global recession is having a universal effect on business and competition from IBCs and plastics containers keeps the industry on its toes. Globalisation is pressuring companies to form alliances in order to compete.

Since this past November, IMTO Envases SA has created an international department to work on expanding the firm by studying new markets. IMTO, based in Spain, has also been investing in new production lines as part of a plan to sell smaller containers of 25 litres or less. In a market where the demand for drums has stabilised, Jurgen Monsieur, the company's international trade manager, says that the demand for smaller packages is still growing in Spain. The production lines are designed to manufacture higher quality packages for corrosive materials, with a soldered seal covered with a powder paint that inhibits oxidisation. The company also offers a lithographic design service to offer customers visible design options on containers.

In 2002, IMTO plans to increase its gamut of packagings. One option it will pursue is the concept of conical open-head drums, which will be released in March. Monsieur says that the 110-litre drums are "perfect for liquids," having been designed with varnish manufacturers in mind, and that 32 of these empty drums can be stacked on one pallet. The company is also keen to follow the customer trend towards IBCs through alliance with foreign companies, whereby IMTO will assemble and distribute the 1,000-litre containers in Spain.

Izvar Ambalaj Sanayi ve Ticaret AS in Turkey is another company that has added conical drum production machinery to its orchestra of equipment. Working in concert with the newly developed Iztainer production line (see page 62) and having increased automation in the drum reconditioning line, Izvar is in good condition to take on new markets. Devaluation of the Turkish lira has given the company an advantage in export markets. This, twinned with low steel prices worldwide, promises Izvar a good year. Alpar Izmiroglu, assistant general manager, says the company will "concentrate on foreign markets to increase export figures," in 2002 and is confident that Izvar can fill the gap of industrial packaging supply in the country, although domestic demand has been subdued in the past year of Turkish economic recession.

Evan Sotiriou of Sheet Steel SA says that his company has been in a transitional phase over the past year, having invested in new equipment for automation and expanded into the aluminium market, adding aluminium profiles to its portfolio of metal products. Sotiriou says that the evolution and growth of chemicals and lubricants production and trading in Greece, where the company is based, has helped to bolster business over the past year. The company is working towards fulfilling stricter quality specifications and is tackling environmental issues, in working to control emissions where paints with solvents must be contained. Sotiriou does not yet see IBCs as a threat to the steel drum side of his business (which accounts for approximately a third of turnover) and cites their comparatively bad handling characteristics and the difficulty of reconditioning as the major factors involved.

Dovechem Stolthaven Limited, based in Singapore, has benefited from the further growth of the country as a recognised petrochemical hub. The company has consolidated its operations in the past year and has rejuvenated and replaced old equipment. Dovechem now has a 720 drums per hour production line and is planning to automate the process further while at the same time maintaining quality, says Joseph Hu, general manager. Automation is necessary as the cost of labour is rising. Hu says, "cheap freight charges and globalisation are threatening drum markets. Over-supply has caused price reductions in previous years," but with the attitude that customer's requests come first, and with investment in technology, Dovechem is in a good position for the new year.

In Israel, Pachmas has been developing its steel drum recycling capabilities in the past year in order to reinforce marketing ties with customers. The company will continue to increase activity in this recycling market and extend it to renewing IBCs in 2002.

Seeing that the steel drum industry is "in a constant struggle to survive," it is no wonder that Nathan Josman, vice-president of sales and marketing, reports that the proportion of turnover derived from plastics drums is falling as the company increases plastics drum production. In the meantime, Pachmas is employing a global policy of re-engineering while reducing production costs.

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