Proving costly

Liz Newmark examines rising production costs in Europe and their impact on can manufacturing and filling plants across the continent

The European can industry is facing increasing cost pressure. While average Euro-area inflation has fallen from 10% in late 2022 to 2.5% in January 2025, energy prices remain high, and US President Donald Trump’s 10 February decision to slap 25% import tariffs on all steel
and aluminium entering the US from 4 March is expected to spark retaliatory tariffs for imports into the European Union (EU).

Previous tariff announcements had been directed only at China and Mexico. But Trump, who claims tariffs will make the US “rich as hell,” has said European Union (EU) would also “absolutely” be targeted as “they have treated us so awfully,” he had said when discussing the tariffs on Mexico and China, but that he would “work something out” with the UK.

A Dalhousie University, Nova Scotia, Canada, expert note stressed that the move would indeed have most impact in Canada. Also, the UK does not import or export much steel to the US. However, trade body UK Steel said any US tariffs would be a “devastating blow” to the British industry, harming domestic demand, including can manufacturing and filling.

Rising production costs across Europe are already a problem. For instance, they led Italian family-owned multinational the Bolton Group, in 2024, to close its canned fish plant in Quimper, France. Since 2020 and the Covid-19 pandemic, the business experienced a strong decline in sales due to rising production costs and good inflation, as well as to changes in consumer preferences and market share erosion caused by the entry of private labels. “All of these factors combined have brought on ‘excess production capacity’,” it said in June 2024, which has affected “all European sites within the group, necessitating production streamlining.”

Can manufacturers and industry organisations are often reluctant to discuss their own production costs, however, with a spokesperson for US-based global aluminium manufacturing company, Ball, saying this would reveal “information of a confidential nature.” European industry group, Metal Packaging Europe, has said revealing detailed production costs could put companies in breach of EU competition rules.

As for solutions to the issue, keeping businesses afloat by shifting production from one part of Europe to another, where costs were lower, is not the answer, said Francesca Stevens, secretary general of Europen – the European Organisation for Packaging and the Environment. “Delocalisation should not be the answer for Europe’s metal industry, and other basic material industries or European manufacturing in general. The European industry has what it takes to be globally competitive, but for this, the EU and its national governments must prioritise addressing the structural issues that are undermining its industrial competitiveness, from high energy costs to ideological policies and overregulation and an increased fragmentation of the EU Single Market.

“If these structural issues are not addressed, I don’t think that we will necessarily witness an entire relocation of the EU packaging industry,” Stevens told CanTech International.

“However, closure or relocation of upstream industries will have an impact on production costs for the mid- and downstream part of the value chain, thus impacting the price of packaging and packaged goods,” she argued.

For Switzerland-based food and beverage multinational, Nestlé, metal packaging production costs are an important industry challenge. “Generally speaking, all increases in raw material including packaging costs can impact the product price. However, packaging is usually not the largest cost component of products and can therefore often be absorbed,” a spokesperson said.

They continued: “In light of the ongoing economic challenges for consumers and persistently sustained inflation levels, at Nestlé we have continued to act responsibly and transparently. We have been seizing every opportunity to create operational efficiencies and have absorbed increasing costs before considering other options.” Steve Claus, secretary general of Steel for Packaging Europe, said that keeping competitive was key to survive economically and environmentally, including “conserving resources and reducing emissions.

“Ensuring EU steel for packaging remains competitive on global export markets will enable steel for packaging to… help achieve the aims of the European Green Deal [the pro-environment policy of the European Commission and provide Europe with competitive technology and sustainable products,” he told CanTech.

Money talks – but with inflation cash does not buy what it used to – the can industry has been struggling with rising costs. Image: epSos.de

In a statement provided shortly before Trump’s tariff announcement, Claus said: “Following the US election and recent political transition in Europe” his group, with European steel association Eurofer, European trade union industriALL Europe and supported by cross-party MEPs, had called for an EU Steel and Basic Metals Action Plan. This is designed to strengthen EU trade defence instruments to stop unfair trade practices and ensure European steel makers’ competitiveness, facilitate transitions to sustainable practices and protect jobs across Europe.

“We have also backed the call to implement robust EU policies that will establish a level playing field between EU manufacturers and imported steel, benefiting stakeholders across the value chain.” That could be encouraging industry-led initiatives, such as the introduction of chromium-free passivation alternative (CFPA) based on a protective titanium and zirconium oxide layer embedded in a polymer matrix and is 100% chromium-free developed by Steel for Packaging Europe, formerly APEAL, members. It helps them comply with EU environmental regulations, such as REACH. This, said Claus, would help to uphold the “highest standards of environmental responsibility and regulatory compliance in European manufacturing.”

Turning to aluminium, European Aluminium (EA), representing more than 600 plants in 30 European countries, has also been concerned about costs loaded on by burdensome regulation, notably the EU’s May 2023 carbon border adjustment mechanism (CBAM) regulation. Developed to ensure decarbonisation goals are met by preventing carbon leakage, “this cannot be considered as a suitable alternative to existing EU carbon leakage protection measures and will increase global emissions as well as cost increases across the entire downstream aluminium value chain and their customers, thereby undermining the industry’s competitiveness,” the EA argued in a November 2024 position paper. It states that if the CBAM product scope is not expanded to include downstream products containing or made entirely from aluminium, “costs will increase for downstream products, leading to industry relocation or increased imports of finished goods.”

On a more positive note, the same day Trump dropped his tariff bombshell, the organisation announced that 2022 saw “a record number of used aluminium beverage cans recycled, up to 580,000 tonnes,” in the EU, UK, Switzerland, Norway and Iceland, reflecting a higher overall consumption of aluminium beverage cans and increasing lower cost recycled materials streams.

In the UK, Metal Packaging Manufacturers Association (MPMA) director and chief executive, Jason Galley, is also concerned about how policy can boost costs: “What most concerns the MPMA is the distortion of markets, whether that be geographically or between packaging materials. Despite the threat of Trump trade tariffs impacting global markets, we believe much of the pain the UK is experiencing is self-inflicted,” he said.

“UK energy policy continues to put industries such as metal packaging at a distinct disadvantage compared to its neighbours in Europe,” he continued. “The hike in Employer National Insurance contributions from April 6, 2025, from 13.8% to 15% on wages of employees earning more than £9,100 (US$11,458) a year and rising labour costs are also unhelpful from a growth point of view but at least are equally applied in the UK across the packaging types.”

Weight-based fees that can packaging manufacturers need to pay – the so-called pEPR (extended producer responsibility for packaging) to local authorities to cover the costs of collection and recycling – are most likely to damage business, Galley said. Denser materials like metals and glass will pay “disproportionately high fees” compared to less dense materials like plastic and fibre composites, meaning, for example, that the fee per cubic metre of steel is five times that for fibre.

“We remain more concerned about the distorting effects of pEPR fees. While these do not show up on the bottom line of the packaging producer, they weigh on the associated costs for brands who will change their purchasing behaviour as they seek to mitigate their large pEPR bills.

“These irrational pEPR costs, which actually undermine the objectives of the government scheme to progress the UK’s circular economy, are very real for manufacturers. As a result, the future of the steel food can is under pressure,” said Galley.

Rising production costs will not help the can making and filling industry and these remain historically high, said Rafael Sampson, manager, public affairs and public relations of EU food industry organisation FoodDrinkEurope. He told CanTech that while, “In our latest [April– September 2024] input cost bulletin, we saw in August 2024 that producer prices of light metal packaging had fallen by 3% compared to August 2023, this still remains 24% higher compared to August 2021.”