Incoming US aluminum sheet capacity will necessitate more scrap recycling: panel | S&P Global Commodity Insights

2023-03-08 17:09:59 By : Mr. Ivan Arthur

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Incoming US aluminum sheet capacity will necessitate more scrap recycling: panel

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Industry seeks expansion of container deposit programs

Scrap needed to supply wave of new sheet investments

Consumer container recycling programs in the US will need to expand in the coming years to ensure that ample volumes of scrap will be available to supply an incoming wave of domestic secondary aluminum sheet capacity set to come online by 2026, industry representatives said Sept. 29.

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"Today, about half the cans we ship in the US end up in landfills, and that's $800 million plus worth of metal that gets thrown away, which is just unacceptable and way out of step with the rest of the world," Tri-Arrows Aluminum CEO Henry Gordinier said during a press roundtable at the Aluminum Association annual meeting in Washington DC.

"We need this material back and it's essential for the industry's carbon footprint and for future investment."

This year, various companies within and outside of the aluminum industry separately announced plans to build a total of three greenfield aluminum sheet mills in the US, the first investments of their kind in over four decades. Each of these facilities will be large aluminum scrap consumers.

Buddy Stemple, CEO of aluminum sheet producer Constellium Rolled Products, said these new investments come at a time when demand is growing, driven especially by the beverage industry and its need for aluminum cans.

The North American aluminum industry has seen overall aluminum demand increase 8% year over year in 2021 and another 6.6% in the first half of 2022, he added.

Stemple and Gordinier are the current chair and vice chair of the Aluminum Association, and both of their companies are major US producers of aluminum can sheet.

Gordinier said the association's ongoing lobbying efforts to increase container deposit programs in the US are critical both for maintaining scrap supplies for the incoming sheet mill capacity and for meeting sustainability targets that are becoming increasingly aligned with industry trends and consumer preference.

"Container deposits are the only program we have seen in the US that dramatically improve recycling rates for aluminum cans and other beverage containers," he said.

Many container deposit programs involve the adding of small deposit fees of about 5 or 10 cents to the purchase of a packaged beverage. Consumers can then redeem their empty beverage cans and bottles to have the deposit fees returned to them.

Stemple said only 10 states in the US have recycling refund programs, but they generate about 40% of all cans recycled in the country.

"We now throw away half the cans we make, so we have to figure that out," he added. "That's going to be the critical thing for getting the metal units for these new facilities."

The new capacity comes at a time when the US has had to increasingly rely on can sheet imports to meet can maker demand for the beverage industry.

Aluminum can sheet imports totaled 222,549 mt in 2021, according to US Commerce Department data. Can sheet imports did not exceed 50,000 mt in any year prior to 2017 and were negligible in 2010 and 2011.

"We're going to need more capacity domestically, and we've heard that loud and clear," Gordinier said.

The incoming capacity includes Novelis' 600,000 mt/year plant in Alabama, a 650,000 mt/year facility from steelmaker Steel Dynamics Inc. in a yet-to-to-determined location and a rolling mill in New Mexico constructed by Manna Capital and aluminum can manufacturer Ball. Capacity details for Ball's mill have not yet been disclosed.

SDI and Ball are not currently members of the Aluminum Association and do not currently operate aluminum sheet mills.

Aluminum Association CEO Charles Johnson said ongoing investments in the domestic aluminum industry also go well beyond the large greenfield sheet mills.

"We are also seeing historic investment in our industry in recycling," he said. "There are going to be openings across the board and announcements across the board also from our smaller and medium-size members."

Since 2021, Aluminum Association member companies have announced $3.7 billion in domestic manufacturing operations, while non-member firms have announced investments totaling about $4 billion, Stemple said.

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