Battle Renewed for More Food, Beverage Cans of Steel

The steel industry’s perennial offensive against aluminum for a bigger share of the food- and beverage-container market is moving full tilt.

Whether the latest effort to regain lost glory will fare any better than sorties of the past depends on whom you talk to. If nothing else, the maneuvering has a decidedly serious tone in 1988.

“We’ve had in the last six to eight months as much conversation around the threat of steel makers as we’ve had at any time. It’s because of the runup in aluminum prices,” said Ronald R. Hoffman, group vice president for packaging systems at Pittsburgh-based Aluminum Co. of America.

Price is the big weapon in the battle for the can, and aluminum makers “are going to fight tooth, nail and claw” to retain their dominance in beverage cans and break into food cans, said David Moisen, container-industry analyst for Resource Strategies Inc.

Alcoa, the nation’s largest aluminum producer, recently announced that instead of boosting can sheet prices as expected July 1, it would hold the price at $1.15 per pound through the summer beverage-sales season.

Can-sheet prices have climbed about 20 cents a pound over the last year, while the price of the raw material, aluminum ingot, has climbed 50 to 60 cents to $1.25 to $1.30 a pound, Moisen said.

“So there’s a negative (profit) margin on can sheet” and aluminum producers are “basically shifting profits from one end of the business to another” to placate their customers, he said.

Steel makers are telling can makers that steel cans are cheaper by $5 to $7 per thousand cans.

“We’ve heard from our customers that they’re examining steel,” Hoffman said. “We believe that talk.”

Across Grant Street in downtown Pittsburgh, hardly a stone’s throw from Hoffman’s office, the head of the nation’s largest steel company is rallying his troops with the encouragement that “escalating prices have opened new opportunities in the beverage-can market.”

Thomas C. Graham, president of USX Corp.’s USS steelmaking division, is giving a pep talk to about 22,000 employees in letters accompanying shopping bags containing steel cans of Chicken of the Sea tuna, Del Monte vegetables, Folgers coffee and Pepsi.

The promotional gimmick also comes with a magnet and a suggestion from Graham that employees take it to their grocery stores and stick with foodmakers who stick with steel.

Steel has other features it didn’t have when the two-piece aluminum beverage can was introduced in the early 1960s and began its raid on the lucrative beverage-can industry.

Modern steel has fewer of the impurities that impede the can-making process. The metal’s thickness and width are more uniform and its non-corrosive tin coating is more even, steelmakers say.

A snap-open steel top also has been developed to compete with the aluminum one.

In addition, aluminum can walls are so thin that the pressure of carbonation is needed to keep beverage cans rigid, and without such pressure from within, aluminum food cans lack steel’s ability to stand up to pressurized cooking or stacking on grocery shelves.

Food cans also come in a variety of sizes that undermines the production efficiencies possible in making large numbers of uniform beverage cans.

Aluminum, on the other hand, benefits from the more attractive appearance of the bare metal.

It also has the great advantage of an established recycling system, the result of what steelmakers admit was the aluminum industry’s brilliant response to the environmental movement that brought anti-littering container deposits in the 1970s.

Recycling helped clear the nation’s roadsides, portrayed aluminum makers as concerned citizens, provided a source of income to Boy Scouts, volunteer firefighters and others, and saved the companies great sums on raw material.

Aluminum prices, however, have outstripped the savings from recycling, making steel cheaper as a raw material and as the finished can, according to Frank M. Walker, general manager of tin mill products for USS.

Nonetheless, steel makers realize that they need their own can-recycling program.

“Clearly, without a successful recycling campaign of our own, the steel industry will be hard-pressed to cash in on its comparative production cost advantage,” Graham said last year at a recycling symposium.

At that gathering, representatives of 19 steel mills agreed to accept used cans “as is,” without being de-tinned, for remelting.

“That may not sound like much . . . but that was a significant step,” said Robert Paxson, manager of tin mill sales and marketing for Bethlehem Steel Corp.

The American Iron and Steel Institute also is organizing a $30-million, six-year effort to promote and operate a recycling system in an attempt to do for the nation’s municipal landfills what the aluminum industry did for the nation’s roadsides, Paxson said.

Steel has a long row to hoe in the beverage-container market, most analysts agree.

Aluminum cans accounted for 96% of the nearly 74 billion beverage cans shipped in the United States in 1987, while steel accounted for 95% of the 28 billion food cans shipped last year.

Analysts are dubious about steel’s chances for changing that situation significantly.

“There will be some beverage-can lines that go to steel,” but in reality, steel “is barely holding on by its fingernails,” said Cornelius Thornton, a container-industry analyst for First Boston Corp.

With plastics, paper and composite materials making inroads in food containers, “the steel companies might very well be fighting the last war,” said analyst Charles Bradford of Merrill Lynch.