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Eastern promise

From the Hazardous Cargo Bulletin, August 2005

MARKET REVIEW: What has 2005 brought the drum manufacturing and reconditioning industry? Increasing competition from the Far East and escalating material prices mean it is still a rocky road for many in the business.

Short-sighted view

The main impacts on the industrial packaging industry over the past year have come from outside sources. The effects of steel and steel scrap exports to the Far and Middle East, especially China, are causing drum manufacturers and reconditioners significant problems. Demand for steel is so high in these countries that the raw materials needed by western manufacturers are being forced up in price.

In addition, a Packaging Recycling Export Note (PREN) can offer the same value as a Packaging Recycling Note (PRN), therefore leaving products to be as easily recycled outside their manufactured country as in. This has further reduced the availability of used steel packaging to meet the demand for reconditioned drums in Europe and North America.

One the one hand, high steel prices have underpinned strong demand for reconditioned drums; on the other, drum reconditioning companies are finding it hard to source sufficient used drums of an acceptable quality. One such company, European steel drum manufacturer and reconditioner Blagden Packaging, remarks, "The number of drums available for reconditioning that are good, clean or empty oil or solvent drums is reducing rapidly. This means that the increased demand cannot be satisfied, as indeed neither can the normal demand. High scrap prices are seeing drums going for scrap rather than for reconditioning, even though this is not strictly to the letter of the law,” says Jon Shepherd, national sales manager for the UK.

Some other companies, such as Evans Industries, have stopped reconditioning drums altogether. Newly appointed chief executive Janice E Hamilton states that this move was a response to customer requirements: “One of our largest customers for reconditioned drums switched to new drums last year. Due to steel prices we have begun making corrugated tight head steel drums to be able to sell lighter gauges of steel in the body of the drum. We were the first manufacturer in the US to begin producing that drum. The corrugations add strength and support to the drum.”

This trend worries some European and US steel drum producers and the Industrial Packaging Association (IPA) has raised this subject with MPs in the UK House of Commons. “IPA has raised this issue in response to the UK Department of the Environment, Food and Rural Affairs (DEFRA) Consultation Paper on Producer Responsibility Obligations (Packaging Waste) Regulations 1997 and also directly to the government through various meetings with MPs in the House of Commons at the All Party Parliamentary Group (APPG) on Packaging”, says Phil Pease, chief executive of IPA.

Other industry players believe high steel prices to be only a temporary situation, one that will see the industry recovering by the beginning of 2006.

However, in the short term the price increase in steel is one part of an overall trend towards a general thinning of steel drums and other industrial packaging, including IBCs. This subject has been discussed at several recent meetings of the UN Subcommittee of Experts (SCOE) in Geneva. But while it is being discussed the realities are hard to live with.

“Most steel drum manufacturers continue to use reducing metal thickness as the way to sell their products,” says Howard Z Skolnik, president of container manufacturers Skolnik Industries. “Less steel means less cost to the customer. This concept is short-sighted and leads the customer down a slippery slope which eventually will result in increased hazardous material spills, increased cleanup costs, increased risk in transport and eventually the drum will lose the confidence of shippers as a dependable shipping container.

“There is now a greater acceptance of thinner gauge drums worldwide. Prices doubled and manufacturers responded by thinning their drum materials.

However, drum thickness can be directly linked to the safety of the industry, and unfortunately, to the profit and loss of worldwide steeldrum manufacturers,” says Skolnik. Skolnik’s ‘boutique’ style of drum manufacturing offers something different from its competitor.

Skolnik believes it is futile to compete with the long-established manufacturers of standard steel drums and, therefore, specialises in producing drums that no other producer wants to make. This growing niche industry could, however, be pushed even further if drums walls continue to get thinner, taking safety precautions with them. Now is a good time, Howard Skolnik advises, for independent manufacturers that can see a customer requirement and fill it with quality and economy.

Buy cheap, buy twice

The Reusable Industrial Packaging Association (RIPA) is also promoting thicker steel drums, as president Paul Rankin explains. “The Association believes that the continuing march towards the manufacture and use of ever thinner steel 55-gallon drums presents both safety and environmental problems. We are already seeing evidence that some ‘thin’ steel drums are doing less well in transportation - particularly on long trips - than their more robust predecessors. In addition, in some environments in developing nations, incidents involving a release of product during handling are more of a problem than in the past.”

US reconditioners are concerned that, as drum manufacturers reduce metal thickness, safety and environmental issues will arise. “Studies have shown that scrapping of industrial packaging that may contain hazardous residues is significantly less environmentally sound than reuse. In addition, scrapping also requires greater energy inputs that leads to higher pollutant loadings than packaging reuse, because new packaging have to be produced to replace those that have been scrapped. Generally, RIPA finds it troubling that some policy makers and users would promote practices that limit packaging reuse,” says Rankin.

The only way forward, says Rankin, is for a global recognition of the benefits of thicker steel and industrial packaging reuse. “In the US and Canada there are minimum thicknesses that a steel drum must meet in order to be reused. We are gratified that some larger national and multinational companies with whom we are working recognise and appreciate the safety and environmental benefits that derive from the use and promotion of multi-trip industrial packaging. As yet, however, we have not seen industry calling for a commonb ‘world’ drum that offers these benefits. RIPA would like to see such a drum; perhaps the 1.0 mm drum could serve this purpose,” says Rankin.

However, this year has not only been notable for the lack of cost-efficient steel: the lack of costefficient staff has also caused some upsets. In 2005, many companies have complained of problems in finding skilled workers, forcing them to find a solusolution from elsewhere. Dutch drum manufacturer and reconditioner Janus Vaten, has been forced to look east: “Rules and regulations are getting more strict every year, especially on labour and the environment.

Labour is hard to get so the company’s new labour comes from eastern Europe, namely Poland and the former East Germany,” says newly appointed company president Pim Janus. “This labour shortage has led to more automation and increasing the production lines.” However, labour costs are not the only reason for Janus Vaten to invest in new technology. The company has recently installed a new shot blaster for steel drums and is also investing in a de-labeller which will be installed in 2006.

Recycling rules are meant to be broken In its inaugural year, IPA has had a busy time helping its members deal with the introduction of new legislation in the UK that has impacted the packaging industry. At a meeting with Sir John Harman, chairman of the UK Environment Agency (EA), IPA raised the problem its members face as a result of regulations driving packaging towards destructive recycling rather than the more environmentally efficient reconditioning for re-use. As a result of this and discussions with MPs the issue will be raised in parliament in the near future.

IPA has also been involved in high-level talks with senior policy staff at the EA to better promote the purchase and re-use of packaging to ensure the most efficient life-cycle. This has resulted in amendments to the EA’s Best Practice Guidance which now recommends used packaging be sent to a licensed reconditioning facility for cleaning prior to being either re-certified for re-use or shredded/crushed for materials recycling.

The Hazardous Waste Regulations, which came into effect on July 16, require all producers of defined hazardous waste to register with the EA. IPA has been a key consultant in the drafting of the regulations and all members have been kept up-to-date with the requirements and interpretations. To this end IPA has held meetings with the Pollution, Prevention and Control (PPC) unit of the EA and the Health & Safety Executive (HSE) and Department for Transport (DfT) to ensure agreement on the definition of ‘empty’ for all used packaging.

IPA continues to work closely with DfT and Pira to establish the UK’s position on various proposals put before the UN Sub-committee of Experts, including current proposals for separate types of marking and tests for composite intermediate bulk containers (IBC) between 800 & 1,000 litres.

IPA has submitted a proposal to DfT to create a scheme, similar to that currently in place for steel and plastics drums, to ensure that only authorised and professional companies with trained staff and approved procedures can provide third-party inspection and leak-test services for IBCs. It is amazing that formal schemes exist for drums (typically 205 litres with closures in the top) to be inspected, tested and marked - yet for IBCs (typically 1,000 litres with closures in the bottom) there is no such scheme in place - allowing anyone to act as a third-party `inspector’.

IPA has also noted that numerous used drums and IBCs are being transported without the correct controls in place as many companies seem to consider – incorrectly - that empty packagings are exempt from the ADR provisions and the Hazardous Waste Regulations.

As a result of this work and the active benefits to its members, IPA has seen its membership numbers rise, when other similar organisations are faced with reducing membership levels.

Conclusion:

The beginning of 2005 is described by Howard Skolnik as a rollercoaster, featuring twists and turns and describes the feeling in the industry in this mid-year point as that feeling when, at the end of the ride, the cars come to a standstill and you expect them to take flight once again. The industry is currently in a lull but industry professionals are convinced the ride will shortly take off once more.

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