Market decline

Pandemic worsens UBC’s recycling problems, following decline in aluminum market

The global coronavirus pandemic has spawned changes in the recycling industry that challenge the used beverage can industry at a time when it was already feeling pressure on several fronts.

“UBCs are probably the most affected metals market,” Joe Pickard, chief economist / director of raw materials at the Institute of Scrap Recycling Industries, told Waste Dive. “It was really bad.”

UBC collection has fallen sharply since the start of pandemic restrictions in the United States, creating a major supply choke point. The drop is occurring even though the volume of recyclable materials collected has shifted considerably from commercial and industrial spaces to residential spaces, where a large portion of UBCs originate. All of this comes shortly after a transition in demand for aluminum that began months ago.

“In 2019, there was a concerted shift from the production of can sheet in the United States to automotive sheet. As the United States was producing less foil from cans, there was less demand for UBCs, which go into can production, ”Pickard said.

Many large manufacturers have turned to auto sheet metal because it is a more profitable business. Arconic, for example, invested $ 100 million last year to switch one of its factories from producing cans to producing auto sheet metal, according to the Wall Street Journal.

At the same time, a tariff exemption for imported can sheet has worsened the situation for domestic aluminum production and UBC’s demand, Pickard said. He added that there is “too much aluminum being produced at the moment relative to global demand.”

Industry professionals believe the combination of these factors could drive more aluminum consumers away from recycled raw materials in the coming months. “I suspect you will see companies more reliant on primary aluminum,” said Matt Meenan, senior director of public affairs at the Aluminum Association.

Supply squeeze and a domestic dilemma

Since the start of the pandemic, many junkyards have gone out of retail operations where they buy UBCs and other metals from people who visit their facilities. But perhaps the most important factor behind the precipitous decline in UBC collection is that many of the 10 states with container buyback programs either openly or implicitly suspended their programs during the pandemic.

The measures were largely taken to ensure worker safety due to the uncertainty surrounding the lifespan of the virus and its infectiousness on materials. Some states have also called for workers in the grocery store deposit program to be redistributed to positions where they are most needed due to the boom in business.

“Container depot states are an important source for UBC in the United States,” Meenan said. “They account for 20% of all aluminum can consumption nationally, but they are responsible for a third of all returning UBCs.”

Drop-off programs are considered the preferred method of collecting UBCs because the materials are cleaner and of higher quality than those collected in curbside recycling programs.

Analysts cite anecdotal evidence – but no definitive data is yet available – indicating that a portion of UBCs that would previously have come through depository programs or retail heist purchases are instead thrown away. Some edging materials are also being disposed of in communities where collection or processing of recyclables has been temporarily halted due to the coronavirus.

In some cases, residents appear to be building up stocks of UBC now that prices are low, and they intend to sell the materials to junkyards once prices rise. Likewise, many aluminum scrap brokers who bought UBCs at pre-pandemic prices are holding onto them until factories and other consumers are willing to pay a higher price.

“This created a tight supply. It’s an artificial crunch because it’s not like there’s less cans or drink consumption… The junk is there, it’s just a matter of getting it in, ”said John Betz, senior aluminum reporter at Argus Media. “There are a lot of brokers who find it difficult to buy UBCs at a cost that is profitable to supply factories. And the factories themselves are struggling a bit because they cannot rely on the flows.

The pandemic restrictions also negate the typical seasonal boost for UBCs. “This time of year is normally quite good for supplying UBC,” Betz said. “I hope that if the stay-at-home orders are canceled [soon], this will help replenish the supply.

Although other commodities have been affected by the lack of international movement of scrap metal when other countries – like China and India – imposed containment measures to stop the spread of COVID-19, states “United don’t export a lot of UBC,” Pickard said. Therefore, the market has not been greatly influenced by overseas activities and is highly dependent on domestic activity. However, the market is affected by the consumption and global prices of primary aluminum.

The last few years have marked the beginning of a domestic phenomenon that has arisen due to the craft beer boom in the United States: the difficulty of recycling cans with plastic labels.

Many of these breweries have chosen to use cans rather than bottles to facilitate shipping, lower costs, and better block UV light to improve product freshness. But box printers are not always able or willing to accept new customers, especially small craft brewers who demand shorter runs for their small, specialty batches. As a result, many craft brewers buy blank cans and affix shrink wrap or sticker labels. These labels do not come off well in the normal metal stripping process during recycling.

Many metallurgy and recycling organizations have conducted educational campaigns or produced design guides to teach the beverage industry about the challenges of recycling UBCs with attached plastics. The Aluminum Association and ISRI do not yet have data as to whether more craft beers with plastic labels were sold during the pandemic, but if that were true, it would further complicate UBC’s recycling.

What awaits us

Until supply bounces back, consumers at UBC could look for other sources of aluminum to continue their businesses, which in turn could reject recycled content in aluminum cans.

“As UBC levels decline, it impacts our ability to use recycled content,” Meenan said. The Aluminum Association estimates that the average aluminum can contains 73% recycled content.

A silver lining to the pandemic is its influence on current demand for UBC, as more people work from home and change their drinking habits. “There is currently an increased demand for cans, which is one of the slightly positive things,” Meenan said.

Industry analysts say it’s difficult to predict what the next few months will hold for UBCs as the pandemic situation is constantly evolving. Still, a popular assumption is that more scrap will flow soon, and UBC prices could rebound, at least to some extent.

“I think we will see a significant influx of UBC when this [pandemic] is over, ”Betz said. “You could see the price of UBCs relative to new aluminum drop as these deposit states start to have a healthier comeback. But it’s hard to say.”

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