Tata Steel, JSW Steel betting big on tinplate

Subsidiaries of the country’s top two private sector steel producers - Tata Steel and JSW Steel - are ramping up capacity in tinplate with an increase in out-of-home consumption and implementation of quality control measures.

JSW Coated and JSW Vallabh Tinplate, wholly owned subsidiaries of JSW Steel, are increasing capacity from 3,50,000 tonnes to 6,20,000 tonnes.

The Tinplate Company of India, a subsidiary of Tata Steel, will be putting up an additional capacity of 3,00,000 tonnes at an estimated capital expenditure of Rs 1,800 crore. At present, Tinplate Company has a capacity of 3,79,000 tonnes.

However, JSW’s additional capacity will go onstream by March 2022. Tinplate’s expansion – approved by the board end of August – is expected to be completed in about three years.

Increased urbanization is one of the reasons why companies are increasing capacity. “Penetration of organized retail prompted us to ramp up capacity,” said JSW sources.

According to Ritabrata Ghosh, assistant vice president, ICRA, previous growth in the industry was not so exciting even though spreads have been stable. “The industry has been growing at a CAGR of 5-6 per cent. But with institutionalizing of retail, growth could be much higher,” he said.

The pandemic-induced trading up has further raised hopes of increased demand. Companies, however, are also betting big on the mandatory usage of prime grades of BIS certified tinplate.

Sources indicated that the reason for Tata Steel's expansion was, largely, based on expectations that there would be better control on quality of tinplate being imported into the country. Tinplate’s growth plans are also aligned with expansion plans of Tata Steel.

Quality control

Effective July 17, 2021, the government has enforced Steel & Steel Products’ (Quality Control) Order, mandating usage of prime grades of BIS certified tinplate.

Tinplate, a packaging medium, is one of the highest value adding downstream products in the flat steel segment.

About 30-35 per cent of the market demand is met by imports. “The balance is largely serviced by Tata Steel and JSW Steel,” said Ghosh.

Data sourced from ICRA show that imports of tinplate and tin free steel in FY20 stood at 2.5 lakh tonne. In FY21, it was lower at 1.8 lakh tonne as international prices were higher and out-of-home consumption was impacted.

“With the implementation of quality control, producers may get a pie of the imports,” pointed out Ghosh.

The implementation of quality control measures has, however, put metal container manufacturers in a spot as foreign suppliers are not being able to obtain certification due to Covid-19 restrictions.

“There is no procedure for virtual inspection currently and due to the ongoing Covid conditions physical inspection is impacted,” said Sanjay Bhatia, president, Metal Container Manufacturers’ Association (MCMA).

“We have therefore requested that the notification be put on hold till March 31, 2022,” he added.

Price rise

Domestic prices are currently lower than international prices. Even though it may not make commercial sense to import right now, Bhatia says that the industry, on an ongoing basis, needs alternate source of material. “We don’t want to depend on one or two sources.”

User industries are also flagging concerns over rising prices even as they are looking to purchase locally made tinplate.

"In Amul, we prefer tinplate containers manufactured in India provided they are of good quality and at affordable prices. Domestic prices have been slightly lesser than the imported ones,” said R S Sodhi, managing director of Gujarat Co-operative Milk Marketing Federation (GCMMF).

“However, we have seen a 62-63 per cent rise in domestic prices in the last five years, which is an area of concern because we cannot raise the food product prices at the same rate," he added.

Amul uses tinplate containers largely for ghee, followed by baby food products, condensed milk and beverages.

Ramping Up:

JSW Steel

JSW Steel current capacity

• JSW Coated: 250,000 tonne

• JSW Vallabh Tinplate: 100,000 tonne

March 2022:

• JSW Coated: 500,000 tonne

• JSW Vallabh: 120,000 tonne

The Tinplate Company of India

• Current: 3,79,000 tonnes

• Adding: 3,00,000 tonne in 3 years