From Hazardous Cargo Bulletin, December 2002
Speaking largely through gritted teeth, some of Europe and North America’s industrial packaging survivors of tell of their market experiences in the face of an ongoing and relentless global recession
“September 11? Isn’t that when the world economy stopped?” despairs Bison-Transpak’s managing director Fred Richardson. “No industrial packaging markets are growing at present,” he adds. “In fact, contraction is the reality.” The company’s main market is based in the UK, where the adverse affects of the “grossly overvalued” pound to domestic manufacturing are causing problems. “Cheap, third-world imports are stealing our markets, despite their quality being poor,” he explains.
“Customer choice when purchasing new packaging is overwhelmingly dictated by price over quality,” says Richardson. “In response to this, we are walking away from business which is unrealistically competitive.” The company is seeking alternative business in fleet maintenance to create revenue.
A 60/40 split between metal intermediate bulk container (IBC) manufacture and refurbishment and testing, respectively, has made 2002 a marginally better year for Bison-Transpak, following a shift in the company’s emphasis to fleet maintenance, as customers cut back on investment in industrial packaging in response to their own market decline. “We have seen growth in complementary services,” Richardson explains. “Customers are repairing and refurbishing their fleets rather than replacing them and there is also a marked change in responsibility to fleet maintenance, resulting in more frequent testing and repairing.
The company formerly known as Transpak is furthering its ties with its fellow Norwegian IBC manufacturer by incorporating the Bison AS name, which Transpak registered in November 1999, into its own to become Bison-Transpak. With plans to target Europe, Ireland and the US, the company is busy preparing for the year ahead. “I expect the first half of 2003 to be indifferent, so we will be looking to increase our range of complementary services,” says Richardson. “We are the major metal IBC manufacturer in the UK. With our distributor status for Bison AS, we aspire to be the major IBC company in the UK for 2003.”
Anticipating an improvement in the market from mid-2003, Richardson is positive that Bison-Transpak will be well placed to emerge triumphant from the current lull. “It is well known that the market is suffering adverse conditions at present,” he concludes. “We are coping by remaining flexible and receptive to customer needs.”
“The IBC market continues to suffer from an excess of supply over demand,” adds Mailbox Mouldings product manager, Adrian Keeler, confirming Richardson’s experience of the UK IBC scene. “This has an obvious knock-on effect with both margins and overall profitability. Competition remains fierce within the industry, making it vital to ensure that the resources within our company are used as efficiently as possible.” Producing a range of rotationally moulded plastics IBCs from 227 to 3,500 litres, Mailbox Mouldings is also closely monitoring the economic situation as unfavourable market conditions persist.
“Capital expenditure for larger projects continues to be tight,” says Keeler. “This has resulted in delays in orders being received or orders being downsized to meet budget restrictions. Company performance in 2002 has been similar to the previous year, with no obvious signs of any upturn. Whilst we are hoping for an improvement in 2003, the current feedback that we are getting from the marketplace is that it is likely to be another challenging year.”
The UK, Ireland and Germany represent the company’s strongest markets, but the company reports that sales are increasing to countries in the Far East, North and South America and Australia. Foodstuffs and pigments are growing areas in IBC offtakes, Keeler reports.
Mailbox’s customers are preoccupied with pricing, getting value for money and the suitability of the end product for specialised containment applications. “More and more customers are seeking customised solutions to their individual packaging requirements,” Keeler adds. “This helps ensure that containers meet the operational and handling needs of both the filler and end user alike.” In close consultation with its customers, the company makes sure specification and cost issues can be addressed to ensure that the most appropriate solution is achieved.
Bonar Plastics is seeking to improve and maintain its position in the UK market and in other European countries, despite the economic lull. “It is difficult to speak at the moment of market growth,” explains Wim-Henk Stoppkotte, director, marketing and sales. “Many companies have carefully controlled their budgets in the current economic climate and are reviewing money spent on investments such as IBCs.”
“It does not need a lot of imagination to figure out what it means when our customers have a growth in volume but a decrease in prices,” says Stoppkotte. “They will have to think twice on spending and investment. Our credo is that we have to find ways to make materials handling more efficient and therefore more profitable for our customers. One way to achieve this is to come up with attractive product solutions.” Safety considerations are becoming paramount in industrial packaging design in response to intensified cargo inspection and more stringent enforcement of dangerous goods transport regulations in Europe.
The company has also made structural changes that will improve its position in the new year. “We have developed, and will continue to develop new products and have invested in our sales team this year,” says Stoppkotte. The international sales structure of Bonar Plastics has been reviewed and implemented over the past 12 months. “The appointment of James Petty as our sales director for the UK, Klaus Malscheski being appointed as sales manager for Germany, Switzerland and Austria, as well as the reinforcement of the central European order desk in Deventer, where Chantal Mollink has taken the position of manager for sales support will improve our commercial strength.”
The company has also installed a large clampshell machine at the Deventer premises in the Netherlands, which will enlarge its capacity. “Last but not least, new products were introduced last year and more are in development,” Stoppkotte adds. Details of the products will feature in next year’s issues of the Bulletin. “Our commercial performance is likely to improve versus 2001, despite the economy,” he affirms. “By continuing to intensify our efforts as well as focus on new markets, we intend to grow again next year.”
Identifying the instability of raw materials prices as one of the main market forces affecting business for Mamor SpA in Italy, direction assistant Laura Lorenzi says that the company cannot employ any strategy against this without compromising the company’s high product standards. Europe remains the strongest market for the company, but the US market is growing fast following the development of alliances formed in the US, she adds.
More business is coming from the chemical market for IBCs in particular. “We have enlarged our German plant and have introduced a new IBC model with a composite metal/plastics pallet,” she says. Mamor continues to strive towards being a truly “global supplier” and is “ready and prepared to offer any solution to support customers’ needs”.
Pressure from all sides
Mauser Container Systeme reports a growing market in jerricans as customers seek to package goods in smaller volumes of between 20 and 30 litres. This is mirrored in Harcostar’s recent achievement of gaining UN certification for solids and liquids of its 30-litre Unitainer range, for which demand has grown, according to sales and marketing manager, Chris Ascott.
At the same time, Mauser has also noted that drums are losing out to IBCs. “The shift of packaging type from open top drum or any other design to IBCs leads to the conclusion to consider IBCs as a strategic product and to develop a product performing to customers’ needs and prepare sufficient production capacity,” says general manager Ernst Wurzer.
In common with Mamor, Mauser reports that fluctuating raw materials prices are putting pressure on processors, who Wurzer places “on the losing side”. The low level of demand for packaging products in the chemical industry is further impacting sales. “Overcapacity creates an environment of fierce competition, while consolidation does not take place. Therefore, efficient production is the key to sustaining business,” he advises. Wurzer expects conditions in the coming year to change little, as the forecast for chemical industry output is not likely to rise beyond three per cent.
“The most important development this year was the introduction of the product range TC 1000, a tube cage design IBC,” says Wurzer. “Alliances have been established and licence agreements have been signed to implement this unit as the global standard design within MIPI. Due to the successful introduction of the TC1000, investment in additional production capacity is scheduled.”
Germany, followed by the US and Benelux area represent Mauser’s strongest markets. In the longer term, Wurzer anticipates that, as the production of chemicals relocates to countries such as China, where labour costs are lower and regulations and restrictions present a lesser obstacle to chemical companies, Mauser’s key markets will reflect this in the years to come.
Stagnant European industrial packaging markets are echoed by Gallay, part of the Mauser group dedicated to steel industrial packagings. “Industrial packagings cannot be exported very far so we cannot grow through supplying new markets outside Europe except through acquisition, ventures, alliances and so on,” explains deputy general manager Marc Jaeger. “This is what Drumnet is about for steel drums and MIPI for plastics containment options.”
Improving its plant internally and focusing on logistics operations, Gallay is optimising its productivity to maximise profit. “We see some competitors becoming weaker,” Jaeger adds. “We can benefit from that in the long term.” Expecting 2003 to be much the same as this year in terms of market conditions, Jaeger says that price will remain a leading factor in customers’ choice of industrial packagings. “That is why we have a continuous plan for productivity improvement and rationalisation.”
Danish stainless steel IBC manufacturer Carrimor has fully automated its production line using panel bending machines and robot welding. As a result, the company has passed a 20 per cent price cut in IBCs onto its customers, which are mainly found in the UK, Nordic countries, Germany and Asia.
Expecting major growth next year, which Peter Holm Møller, managing director of Carrimor UK, says is evident in the company’s orderbook for first quarter 2003, the company has added leasing facilities and will start trip rental in Europe to meet customer interest in reusable packaging options and services. “More customers are responding to EU packaging directives, requiring recyclable packaging that prevents pollution,” explains Holm Møller. “We have customers that have been told by city investors that they will only invest in a company on the stock market if they have an environmentally friendly packaging policy.”
Spanish steel drum manufacturer IMTO is benefiting from the recent introduction of its UN-approved conical drums. “We offer this new type of drum in 60, 120 and 220 litres, sharing our customers’ preoccupation with respect to the availability of low capacity drums and the reduction of transport, storage and manipulation costs,” says international trade manager, Jurgen Monsieur. “The first market response is very positive and we have had interest from important drum consumers from elsewhere in Europe.”
Across the Atlantic Ocean, packagings producers in Canada and the US are taking advantage of a more buoyant economy, where industrial packaging users are beginning to explore IBCs as an alternative to drums.
Traditionally drum-rich markets are beginning to realise the advantages of IBCs in Canada where steel drum manufacturer Great Western Containers (GWC) supplies the 1,000-litre units, along with its existing range of smaller packagings. “We are seeing growth in the industrial chemical and secondary oilfield supply markets,” says business manager, reconditioning, Eric Storey. “The use of IBCs is rather late into this market and we are just now seeing substantial conversion from drums. The demand for drums is flat, as fillers are shifting to IBCs.”
Major changes to the Canadian Transport of Dangerous Goods regulations announced in November 2001 are coming into effect now and GWC’s customers are taking a great interest in the design specifications of their packagings as a result. “With the increased focus on design issues, we think customers will not want to have to explain their unique packaging requirements to many different people,” says Storey. “Therefore, they will be more inclined to deal with one company for all their requirements. We have increased training for our sales and plant personnel, so they may more quickly understand customer needs and offer better quality advice.”
The company has recently invested in a fully automatic reconditioning line for IBCs, in anticipation of growth in this market area. A focus on in-plant efficiency and customer service has also helped GWC to cope with the significant increase in price of cold-rolled steel this past year, coupled with increased competition. “We expect better performance in 2003,” confirms Storey. “Our company intends to continue to focus on improvements in processes and products. We think that the industry will be asked to provide more expert advice and opinions to customers while facing increased pricing competition.”
In the US, Myers Container reports that the new manufacture of IBCs is beginning to produce a glut of units on the market and that prices are under pressure to tumble accordingly. “The ability to be the low-cost provider and having a large selection of used units allows greater marketing opportunities,” explains vice president sales and marketing, Kyle Stavig.
Having expanded its facilities in all markets in California, Oregon and Georgia, Myers is positioned to better serve customer collection and service requirements. The company works with most US IBC manufacturers and has a strategic partnership with Greif. “Cost and collection are important factors in pricing industrial packaging,” Stavig says. “Quality is assumed, so more emphasis is being placed on providing low-cost collection systems. We are working to lower our cost and develop marketing channels for the sale of used IBCs and plastics drums. We have a large supply of inbound units and are working to find homes for all products.”
As growth in the commodity steel drum market continues to plateau, Howard Skolnik, president and chief executive officer of Skolnik Industries, says that markets for specialised containers for dangerous goods are rising. A new focus on security following September 11 (see page 46) has inspired companies shipping dangerous goods to seek out more reliable forms of containment. “Steel containers are seen as one of the most reliable forms of packaging for these highly sensitive shipments,” he adds.
“While many of the commodity container manufacturers are restructuring their management operations, no evidence of new technology is emerging,” Skolnik explains. “At Skolnik, our focus has been on establishing new products which meet even higher levels of quality assurance.” Listening closely to the needs of customers, specific modifications can be made to standard containers.
Customers are also getting more fastidious about lead times. “In the case of military purchases, deadlines are critical,” Skolnik illustrates. “Just making the container in time is not sufficient, we are having to accurately calculate the actual time to when the product is received and ready for use.”
As reported last month (HCB November, page 18) Hoover Materials Handling Group is serving the US market with IBCs manufactured under licence from Mauser. Since then, the company has named Ernie Mathia as president of Hoover’s operations, which is part of a drive towards internal restructuring. “Hoover’s business has been evolving and the industrial packaging and asset tank business units need to act in a more autonomous manner,” says chairman of the board David Wagstaff, who is assuming the duties of chief executive officer. “The board agreed that we needed to make structural changes within the organisation to remain competitive in this new environment.”