Aluminium can inventory surplus will clear by 2025: SDI CEO

Steel Dynamics Inc (SDI) will dedicate nearly half of the output from its 650,000-tonne capacity aluminium rolling mill Columbus, Mississippi, to primarily produce beverage cans, a market currently experiencing a glut of inventory

The company plans to produce 300,000 tonnes of cans, 200,000 tonnes for automotive products and 150,000 tonnes for industrial products at the plant, which is the first such facility in the US to be built in 40 years.

SDI’s chief executive officer Mark Millett said during the company’s second-quarter earnings call on Thursday, July 20, that he believes that buyers “panicked” in 2022 and loaded up on can inventories, much of which still has yet to be used. But given consumers’ sustainability-driven shift away from the use of plastic packaging for bottled water and other fluids, by the time the Columbus mill comes online in mid-2025, any excess inventory will have cleared.

“In all honesty, when our mill comes up, I think that the marketplace is going to be in a beautiful place for us to receive from,” Millet said.

There have been signs of short-term bearishness in the aluminium can market demand, with weaker demand weighing on the first-quarter earnings of aluminium producer Constellium, which shipped fewer cans and specialty-rolled products.

In addition, Ball Corporation plans to close its Wallkill, New York, beverage packing facility on August 31, the company confirmed to Fastmarkets on June 2. The company has also closed facilities in Phoenix, Arizona, and St Paul, Minnesota, in the past year and said it will delay the construction of a new plant in North Las Vegas, Nevada.

Aluminium market demand

In addition to investments by SDI and Ball, MetalX and Manna Capital Partners said in April that they will invest $200 million to build a 100,000 tonnes per year ultra-low-carbon aluminium rolling slab mill in the US Midwest, which is scheduled to come online by the first half of 2026.

In July 2022, SDI announced it would spend around $2.2 billion, which has since been upgraded to $2.5 billion, on the Columbus facility and two remote recycling plants to help feed it.

The company remains bullish on the can sector’s promise in the long term, Millett said. He added that while he didn’t share in post-Covid-19 projections that aluminium demand would be sufficient enough to support multiple new US mills, his company believes that automotive and beverage growth will continue apace.

“We certainly feel there’s more space to satisfy our market share,” he said.

Export demand for US used beverage cans (UBCs) has grown since SDI’s investment announcement. From January-May 2023, exports of UBCs rose 7.77% to 199,493 short tons, while imports decreased 5.01% to 86,525 tons year on year.

Prices for UBCs, however, have declined significantly since March 2022. Fastmarkets’ aluminium scrap used beverage cans, domestic aluminium producer buying price, fob shipping point US hit a high of $1.32-1.35 per lb on March 31, 2022, but fell to $0.73-78 per lb in July 2022. The price was last assessed at $0.66-0.70 per lb on July 20.

Impact on scrap and aluminium markets

In addition to steelmaking, SDI is one of the US’ largest metal recyclers, producing approximately 5.3 million gross tons of ferrous scrap and 1.054 billion lbs of non-ferrous scrap in 2022. The company produced 1.52 million gross tons of ferrous scrap in the second quarter of 2023, a 12% increase year on year, with nearly 580,000 gross tons shipped externally. The company’s average ferrous scrap cost per ton melted at its steel mills rose by $31 per ton to $444 per ton in the second quarter compared with the first quarter of 2023, the company said.

At the same time, SDI produced 280 million lbs of non-ferrous scrap during the second quarter, a 5% increase year on year.

Millett said that he expects scrap prices to “fluctuate modestly” during the rest of 2023, and anticipates a seasonal rise in the third quarter. He predicts the market could see some “moderating again” in the fourth quarter.

Kirstyn Petras in New York City contributed to this story

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