The canned-food aisle is getting squeezed by rising steel tariffs
Soup, black beans and sliced pineapple could all soon become more expensive because of one particular reason: their cans.
Cans used for food require tin-coated, ultrathin sheet steel made from molten iron. Not much is produced in the U.S., where domestic producers have been scaling back production for years.
The Trump administration's new 50% duty on imported steel could increase store prices for items in steel cans by 9% to 15%, according to the Consumer Brands Association, a trade group whose members include Campbell's, Hormel Foods and Del Monte Foods. At that rate, the price of a can of vegetables costing $2 could increase by 18 cents to 30 cents.
'The American consumer is going to pay more for their cans," said Dan Dietrich, vice president for strategy at Trivium Packaging.
President Trump on June 4 doubled the previous 25% tariffs on imported steel, aiming to increase demand for domestic steel by making cheaper, foreign-made metal more expensive. Tariffs are likely to drive up prices for domestic-made steel, too, as U.S. producers raise their own prices.
Can manufacturers say they will continue to buy lots of imported tin-coated steel, known as tin-plate—because there isn't enough of it made in the U.S. to supply them.
'I would love nothing more than to allocate more purchases to the United States, but the overall production capacity is not there," said Robert Gatz, general manager of Can Corp. of America, a Pennsylvania-based maker of food cans.
Can Corp. produces about one billion food cans annually and specializes in cans for tomatoes. Gatz said the company buys about 12% of its tin-plate from domestic steel mills.
Can manufacturers estimate that about three-quarters of tin-plate consumed in the U.S. is foreign-made, with much of it coming from Europe and Canada. Nearly 1.5 million tons of tin-plate were imported last year, about 37% more than in 2015, according to U.S. Census Bureau data.
Tin-plate is made with steel derived from molten iron, but most steel in the U.S. is now made from melted scrap, and that doesn't measure up to the can industry's exacting quality standards. Pittsburgh-based U.S. Steel continues to produce tin-plate but has reduced its production volume in recent years.
Cleveland-Cliffs, another major steelmaker, no longer produces tin-plate after closing its Weirton, W.Va., mill last year. Cliffs Chief Executive Lourenco Goncalves said he has no plans to restart Weirton, though he had blamed the plant's closing on a lack of tariffs on imported tin-plate.
'It's done. When the horse leaves the barn, the horse does not come back to the barn," Goncalves told reporters last week.
The 25% steel tariff imposed in March by the Trump administration raised the cost of producing filled cans by about 7% to 8%, can companies said. They anticipate that doubling the duty on tin-plate to 50% will boost costs by at least 14%.
That higher price will hit canned-food producers. South Carolina-based McCall Farms sells canned green beans, carrots, spinach, sweet potatoes and other vegetables grown in the South. Rising expenses for labor and raw vegetables have already driven up production costs over the past five years, said Thomas Hunter, McCall Farms' co-president.
'The biggest concern we have is that these canned vegetables start getting to a point where the consumers are not willing to purchase them any more," Hunter said.
Cans are prized for enabling long shelf lives for vegetables, fruit and other ready-to-eat foods, able to keep for years without spoiling. But can manufacturers worry that higher can costs will discourage their use.
Cans on a conveyor belt. Can companies say not enough tin-coated steel is made in the U.S. to meet their needs.
The Consumer Brands Association said as many as 20,000 U.S. jobs in food-can manufacturing could be at risk if the tariff on tin-plate causes consumers to shy away from higher-priced canned goods and food companies migrate to alternative packaging.
'We're getting to the tipping point with many customers," said Rick Huether, CEO of Maryland-based Independent Can Co., which produces decorative and specialty cans used for cookies, candy, coffee and popcorn. 'You're just driving them to plastic packaging."
Write to Bob Tita at robert.tita@wsj.com
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