EVs, beverage cans have aluminum on a roll

A global trend away from internal combustion engine (ICE) vehicles toward electric vehicles (EVs) is likely to roil end-market demand for several different types of metal. In the fast-moving consumer goods sector, sustainability concerns are raising questions as to how or whether plastic packaging can reach a recycling rate comparable with competing materials.

The highly recyclable nonferrous metal aluminum seems poised to benefit from each of these very separate trends.

The price of or overall demand for aluminum, like every other metal, has not moved on a straight upward line throughout the COVID-19 pandemic. A dip in the overall sale of vehicles during much of 2020 kept global demand in check, but stable to growing purchases of EVs and of aluminum canned beverages helped bolster a market that already had good long-term prospects.

Preparing for a jolt

Advocates of EVs might sometimes get ahead of themselves when predicting how quickly drivers will migrate from ICE technology to plugged-in vehicles. Makers and drivers of ICE vehicles, meanwhile, have been experiencing frustration with government mandates designed to make their technology of choice obsolete.

What seems clear is that the shift from ICE to EV is underway, even if the conversion takes decades and falls well short of 100 percent. For metals producers and recyclers, this has many implications.

For buyers of industrial scrap and traders of aluminum scrap, an ICE to EV conversion is likely to mean new opportunities on the aluminum sheet side but carries the potential of a receding cast aluminum industry.

In a 2018 analysis of how growing EV market share in China affected that nation’s aluminum sector, Henry Van of London-based CRU Group notes that ICE vehicles “are secondary-castings intensive—used in engine blocks, piston heads and transmissions.” Those same components, comments Van, are not used in the powertrains of EVs.

Producers of aluminum sheet in China continued their output apace, Van adds, since EV makers gravitate toward the light metal for body panels and exterior parts. Thus, the scrap packages prepared by processors and traders seem poised to experience an evolution away from those heading to casting facilities and toward grades that can be worthy feedstock for aluminum sheet production.

Global aluminum producers already are preparing for an automotive sector that has begun skewing toward EVs. National target dates for an EV switchover are increasingly being joined by announcements and investments by vehicle producers, ranging from General Motors (GM) to Volkswagen.

Europe-based Constellium and Atlanta-based Novelis have formed an initiative designed to ensure aluminum car body sheet remains a preferred choice, as the light metal continues to engage in its decades-long market share competition with steel. Constellium is involved in a similar initiative in Europe.

For processors of end-of-life vehicles (ELVs), the changes in their material stream will occur more slowly, but significant responses will be necessary to adjust to an eventual decline in things like catalytic converters, lead-acid batteries and the amount of steel and iron in ELVs.

Aluminum’s fate is likely to be different. A July 2020 Reuters article quotes CRU’s James Wren as estimating the average amount of aluminum used in EVs is 30 percent higher compared with ICE cars.

Producers of the metal already are preparing to serve a market that is growing in Asia and Europe and that is starting to gain momentum in North America.

Tying EVs into the sustainability movement has caused companies including Alcoa, Rio Tinto, Norway’s Hydro and Sweden-based Gränges to offer sustainability “branded” aluminum. The London Metal Exchange (LME) is finalizing a series of new contracts designed to set a price for these products, as well as for targeted grades of aluminum scrap.

Beyond the changes on the highway, another one in restaurants, taverns and homes has prompted additional investments in aluminum and the recycling of the metal.

Another round, please

For several decades, marketers of aluminum cans have touted the established recycling infrastructure for used beverage cans (UBCs) as a reason for makers of beer and soft drinks to opt for that form of packaging.

The growth of the sustainability movement already was creating some momentum for aluminum cans when the onset of COVID-19 and subsequent restrictions prompted another boost. With restaurants and taverns closed and restricted to smaller crowds or fewer hours, buyers of soft drinks and beer elevated their purchases of canned and bottled drinks.

In the aluminum can market, this caused shortages of inventory. This shortage was exacerbated for a while by restrictions in some places that halted or slowed the sorting of aluminum UBCs from the wider commingled recycling stream. (The Aluminum Association in the United States estimates cans made there are comprised of 70-percent-recycled content.)

The availability of vaccines in 2021 may help revive the sale of fountain soft drinks and draft beer as they claw back some of the overall beverage market. Judging by investments in aluminum can production in the last 12 months, however, players in that sector think sustainability programs and targets will continue to propel aluminum as a preferred beverage packaging choice.

In a January 2021 interview with Recycling Today, John M. Rost of global packaging maker Crown Holdings states, “Now, more than ever before, sustainability is a top priority of all major food and beverage companies—and their search for more eco-friendly packaging options is what often drives them to cans.”

Rost, who serves as vice president of global sustainability and regulatory affairs for the $11.5 billion firm, adds, “An important differentiator with cans is that they are not only recyclable in theory but actually recycled in practice. That recovered aluminum can be transformed into new cans within just 60 days, preserving resources and helping brands invest in a more sustainable, responsible production process.”

For recyclers of UBCs, the market looks healthy going forward based on recent investments for new can capacity by Crown in Kentucky and Virginia in the U.S., and in Brazil. Crown is not alone in adding capacity, as Ball Corp. is doing so in Arizona and Pennsylvania in the U.S. Poland-based Canpack S.A. also announced plans in 2020 for a new aluminum can plant in Pennsylvania.

If UBCs are being generated, the effort will be made to collect them, whether by established scrap recyclers or by municipal programs with access to funding mechanisms.

The forms of aluminum scrap that flow into processing facilities around the world might undergo major changes in the next two decades, but the overall supply of and demand for aluminum appears to have some encouraging trends in its favor.