US aluminum can industry struggles to keep up

US beverage producers using aluminum cans are having difficulties keeping their products on supermarket shelves following an unprecedented spike in at-home consumption of soft drinks and alcohol.

Because fewer Americans are consuming soft drinks and beer at restaurant and bars because of gathering restrictions related to the Covid-19 pandemic, more are taking beverages home from grocery and liquor stores in aluminum cans, catching the supply chain by surprise.

"Due to the current situation, some of our products may be in limited supply," Coca Cola's official Twitter account replied to dozens of inquiries from consumers searching for missing soft drink products. "We're working hard to get them in stores."

The company has been prioritizing its most commonly consumed products, causing some less popular varieties, such as caffeine-free and sugar-free vanilla, to be temporarily unavailable.

"The aluminum beverage can manufacturing industry has seen unprecedented demand for this environmentally-friendly container prior to and especially during the Covid-19 pandemic," said Matt Meenan, spokesman for the the Washington-DC-based Aluminum Association. "Can sheet producers have increased shipments to market, which were up significantly in May."

US Census Bureau data estimating beer, wine and liquor store sales at 2,500 participating stores showed a 17pc spike in March from the prior month to $6bn. April results dropped from that peak to $5.6bn, which was still 7pc higher than February. Before Covid-19, these sales were growing at a monthly rate of less than 1pc.

Raw material imports

The sharp increase in take-home beverage demand also necessitated higher US imports of can sheet. The US relies on a mixture of domestic and imported aluminum beverage can sheet, which are formed into cans by companies such as Ball and Crown.

US imports of can sheet in January through May rose by 34pc from a year earlier to 88,089t.

During March and April, imports rose by 6pc and 23pc, respectively. Imports dropped in May by 10pc from the same month in 2019, likely as US rolling mills made more progress in responding to higher demand for can sheet.

For US rolling mills making can sheet, raw material availability was an issue up until recently as closures of scrap yards, material recovery facilities and state deposit programs tightened the supply of used aluminum beverage cans (UBCs). However, as states reopened deposit programs and scrap yards resumed normal buying, supply has returned to a more normal balance.

Through May, US imports of UBCs were up by 23pc at 55,769t as mills leaned on offshore cans until domestic supply improved.

Last week US mills and brokers paid 59.5pc of the price for new aluminum for UBCs, off from a peak of 66pc when Covid-19-related social distancing measures weighed on the flow of scrap and forced buyers to reach.

Mills and brokers buy UBCs at a higher percentage of the P1020 Midwest transaction price for new aluminum when they are in need of scrap and a lower percentage when they are well supplied.

By John Betz