Arconic weighs return to US can market

Arconic will be allowed to formally re-enter the North American packaging sector at the end of October after the company's non-compete agreement with former upstream half Alcoa expires.

"We currently have idle packaging capacity at our facility in Tennessee, which we can bring on line with minimal capital outlay, as well as incremental capacity we can bring to bear in both Russia and China to service this market," chief executive Tim Meyers said today.

While the Pittsburgh-based aluminum mill has not produced can sheet since 2016 when it split with Alcoa, it supported Alcoa's can sheet business through a tolling agreement at its Tennessee plant that expired at the end of 2018.

US demand for aluminum can sheet has surged since Covid-19 social distancing procedures caused bars and restaurants to close, spurring more take-home consumption of beverages in cans as opposed to draft or fountain form.

A new competitor in the US aluminum used beverage can spot market could significantly increase competition and tighten scrap buying spreads.

Arconic's current book of business suffered in the second quarter as result of Covid-19 as sales fell by 38pc to $1.2bn from a year earlier. Revenue from Arconic's largest segment rolled products dropped by 40pc to $880mn, building and construction system sales were off by 21pc at $230mn and extrusions fells by 44pc to $81mn.

Still, the company expects second half demand from its automotive customers to return to levels near the second half of 2019 following a rough second quarter.

"In the automotive market, there was a V effect, rebounding from the quick decline in [the second quarter] with steady improvement from our auto customers," chief financial officer Erick Asmussen said.

Outlooks for other sectors the company serves were less optimistic though, including Asmussen predicting a potential 50pc decline in second half aerospace revenue compared to the same period in 2020.

Arconic posted a $92mn loss in the second quarter compared with a $5mn profit a year earlier.

By John Betz