Metal packaging facing 2.5-lakh MT per annum demand-supply gap

The Rs 10,000-crore metal packaging industry in India is poised for growth if it can brave the insurmountable hurdles and red tapism. Abhishek Muralidharan and Rahul Kumar interview MCMA and Hindustan Tin Works' Sanjay Bhatia

30 Jan 2021 | By WhatPackaging? Team

Bhatia: Hygiene conditions and product safety will increase the demand for metal packaging

India has an unusual market profile for metal packaging. Even today large rectangular containers for cooking oil dominate the market. Where is the ‘new’ demand coming from?
The requirements of the food industry have changed considerably due to Covid-19. With restaurants closed, people are eating at home and they are buying smaller packs of food which can be consumed immediately. Post-Covid, this trend is likely to continue. People have also realised that metal packaging is recyclable, and environment-friendly products packed in metal containers have a longer shelf life and can be stored in ambient temperature. On account of this, demand from the food industry will certainly increase.

What are the packaging trends for canned food and dairy and edible oil and beverages and even gulab jamun and rasgullas? What is the technology focus of HTWL in terms of new lines in order to compete in the new India?
Sweets and other items are already being packed in metal packaging, including rasgullas, milk powder, oil, beverages, etc. More and more items will get packed in metal packaging on account of hygiene conditions and product safety. The focus of HTWL is both cans and components. As far as cans are concerned, HTWL continues to manufacture both for food and non-food. In the food category, the cans are used for packing dairy products, baby foods, processed foods, juices, etc, and in the non-food, cans are used for products like paints, shoe polish, sanitisers, room fresheners, etc. 

The Indian metal packaging sector is expected to register a CAGR of 6-7% in the period 2020 to 2025

The Indian packaging industry, which was valued at USD 50.5-billion in 2019, is expected to reach USD 204.81-billion by 2025 (This is a CAGR of 26.7% from 2020-25). To what extent will the metal packaging segment benefit in the next five years? 
Metal packaging in India is about Rs 10,000-crore as the awareness of metal packaging is quite low in the country. The Metal Containers Manufacturers Association of India (MCMA) is highlighting the advantages of metal packaging over other packaging material. This would generate a good amount of growth for metal packaging. 

Please explain.
Metal packaging is divided into aluminium and tinplate. We are in the tinplate section. While aluminium is mainly used in the beverage sector comprising of aerated drinks and beer, tinplate container is used for all other food products and juices, etc. The food processing industry is being strongly promoted by the government of India and this could generate considerable share to the metal packaging sector.

Metal packaging vs aluminium packaging

Tinplate and aluminium are two different forms of metal packaging having their own end uses. Apart from the fact that aluminium is a much lighter packaging material and can more easily be converted into containers, aluminium cans are mainly used in the aerated beverages and beer sectors. That is the reason TCIL & JSW should consider producing a lesser thickness of tinplate to combat competition in certain market segments.

And the challenges?
Metal packaging in India is facing a severe challenge of raw material due to a huge demand and supply gap. Added to this the fact that the government is enforcing quality control order for raw material and finished products made of tinplate, like closures for the cans. This has resulted in a tremendous shortage of raw material and tinplate prices have gone through the roof. Already 2020 has caused heavy loss of business on account of Covid-19 and lockdown. This shortage of raw material created by tinplate manufacturers is going to hurt the metal packaging more in India. In spite of the many issues facing tinplate container manufacturers, the Indian metal packaging sector is expected to register a CAGR of 6-7% in the period 2020 to 2025.

In what way has the BIS impacted the metal packaging industry?
Already there is a wide gap of approximately 2.5-lakh MT between demand and supply of domestic tinplate in India. With Covid around, international tinplate manufacturers are not in a position to get certifications under BIS (steel and steel products quality control order). But the steel ministry is adamant about imposing the BIS and not even willing to accommodate equivalent ISO standards. This has kept the foreign tinplate suppliers out of the country and the Indian producers are unable to produce enough material to meet the demand. Additionally, prices of tinplate have hit the roof. 

On the BIS rule
Since the QCO also covers steel products like easy open ends, peel-off ends, domes and cones and other closures, the metal packaging industry imports these products in different sizes and specifications from various countries. The requirement under QCO of use of tinplate/ tin-free steel, which is approved by BIS for manufacture of such products is totally impractical and unworkable. The products may be coming from four-five countries in different continents and for all the tinplate suppliers in those countries to supply tinplate to the product manufacturer and asking him to take BIS license in India is not practical at all. This would result into non-availability of these components to the industry as these components are virtually not manufactured in India due to huge investment in plant and machinery, especially when the demand in India do not justify such investment.

The MCMA has been at the forefront of the government’s plans to restrict tinplate imports, as well as the introduction of the anti-dumping measures… 
The MCMA has been leading the representation with the government on anti-dumping duty and BIS because this directly affects the members of the MCMA. The industry employs more than 100,000 people directly and indirectly in their units. All the members of the MCMA are MSME companies and these measures by the government will sooner or later kill these companies. It is, therefore, important to take up these issues with the authorities and try to explain to the concerned ministries not to implement such measures. The MCMA has been successful in stopping anti-dumping duty last year and BIS in the past so many years.

What has been the role of the steel giants Tata Steel and JSW? 
The TCIL and JSW are beneficiaries of both anti-dumping duty and BIS. If the government implements these two measures, then we apprehend that both these tinplate manufacturers will dictate terms and increase the prices of tinplate. Both TCIL and JSW should be actually concerned about promoting metal packaging in a bigger way in India, but they are not helping the metal packaging industry to grow. Although it is in the mutual interest of both tinplate producers and can manufacturers to work hand in hand, it is not happening. While producers are pushing up for anti-import measurers like QCO, anti-dumping duty, etc, on the other hand, the can-making industry is pushing for the supply of inputs as per their requirements at competitive prices, as there is a demand-supply gap in India to the extent of 2.50-lakh per annum.

Hindustan Tin Works' automated manufacturing facility in Sonepat

Would it be true to say that India is a small market for the international players and they are not interested in getting into the lengthy red-tapism and cost-intensive BIS certification process?
Yes and no. Of course, India is a small market for these international tinplate players and they would not like to get involved in red-tapism. Cost of the BIS certification is also a very serious issue, which they would like to avoid if possible. However, some foreign companies are willing to go through this exercise because they have representative offices in India, as they are already supplying material to Indian manufacturers. However, due to Covid, approval of applications by tinplate exporters are pending with BIS.

Follow up question. Tin plate is 65% of the cost of the final product. The tinplate demand is expected to grow at 4-6% and reach around 770-800 KT by 2024. Is this enough? 
Demand would surely increase for tinplate in the medium and long term, with the MCMA promoting tinplate as the most environment-friendly packaging and highlighting more benefits of metal packaging over other packaging material. However, unless TCIL & JSW increase their production to meet the demand and reduce the demand-supply gap considerably, metal packaging cannot become the most effective packaging solution in India. Further, both TCIL and JSW should also produce tinplate in thicknesses that help save packaging cost and assist container manufacturers to meet the challenges from other packaging material.

What is the update from the Hindustan Tin Works?
Although our plant in Sonepat was shut for the month of April and partially for May 2020 due to the lockdown, we could resume our operations by the end of May and picked up the production activities from June onwards. However, our customers in HORECA segment were not operational almost till the end of October. The demand for aerosol cans particularly for sanitisers, disinfectants, etc picked up. We would make up our loss for production from these segments.

HTWL exports its products to more than 30 countries around the world

Ball’s acquisition of Rexam in 2016 was a tough phase for HTWL. With players like Canpack and Ball in India, what has been the HTWL business strategy during the past few years?
HTWL, in a joint venture with Rexam, set up the first beverage can plant in India in 2007 and worked successfully for opening up the beverage can market in India. The demand for beverage can was about 60-million/annum and we are pleased to note the demand now is close to two-billion cans per annum. However, beverage cans mainly cater to the demand for beer and soft drinks industry and do not clash with the market of three-piece tinplate cans. 

The green quotient of metal
Tinplate is fully recyclable after use. Used cans can be easily collected from municipal waste and sold to the dealers who in turn sell it to the melting plants. Steel remains steel throughout the life cycle and there is no loss in recycling. The MCMA has been highlighting the features of the 100% recyclability, sustainability, etc of the packaging material.

There is a large use of tin plates in SME industries engaged in manufacturing of lantern, stationery boxes, mosquito coil holders and so on. To what extent are these players catering to this sector?
Since this particular segment is concentrated in MSME and are engaged in the manufacturing of non-edible products, it mainly uses non-prime material, which is commercially available at a lower cost and the industry is able to utilise such material by employing more people.

From inheriting a company, approximately 40+ years ago, to the now, it’s been a long and challenging journey. What next for HTWL?
In the last 40 years, HTWL has upgraded the plant from a semi-automatic unit to one of the most modern, well laid out units in the country. Initially, HTWL was primarily making cans for edible oils and now it manufactures cans for virtually all the products like food and non-food. HTWL is also exporting its products to more than 30 countries around the world.