Shift from plastic to aluminium in beverage industry to boost can sheet demand in the US; industry sees a supply gap

The drive to shift to more eco-friendly products is sweeping through the U.S. beverage market, with plastic being replaced with aluminium cans. Firms including Nestle and Unilever have announced plans of changing their packaging material from plastic to aluminium partially. While Coca-Cola announced changing it Dasani water brand into aluminium cans, PepsiCo announced selling its water brand Aquafina in cans.

According to research firm Harbor Intelligence, demand for aluminium can sheet will grow about 3% to 5% a year through 2025 as aluminium cans gain further market share against plastic.  Growth was almost flat for last 20 years and most of the rolling mills in the U.S. have already shut operations.

Previously, U.S. producers were focusing on the auto industry and can manufacturers were depending on imports for their production. Now, most of the leading aluminium makers including Alcoa is projecting bullish outlook for can sheet.

“We’ve started to see that the North American can shipments are showing signs of growth,” Tim Reyes, Alcoa’s executive vice president of aluminium said in an interview. “There’s a lot of advantages toward using aluminium for sure, and I think that’s the trend that we’re seeing now versus the disadvantage of a single-use plastic beverage container.”

The drive to substitute plastic with aluminium has its own challenges.  The environmental benefits of aluminium can depend on its rate of recycling. About 100 billion cans are consumed each year in North America, according to Ball’s Hayes. Consumer recycling rate for aluminium can stands at about 50% in the U.S. The industry recycling rate stands at 63.6%.

Another problem is the potential supply gap for aluminium can sheet in the U.S. aluminium industry. It is not clear if the available supply can substitute plastic bottles with cans.

According to Wood Mackenzie import will account for about 15% of U.S. consumption of aluminium can sheet compared with 10% in 2018 and 7% in 2017. The American aluminium market is also expected to record a deficit of 200,000 tons this year, up from a shortfall of 115,000 tons in 2018.

Ball is importing a major part of aluminium can sheet from outside the U.S., according to the company, and even an one per cent demand growth would require them to additional 19-20 billion cans.

Hayes said that they are “just trying to keep up with existing customer demand, because we have very little inventory.” “The biggest challenge we have is procuring the necessary aluminium and having our own production capability,” he added.

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