May/June 1994
The UBC recycling rate slipped in 1993, weighed down by weakness in key consuming sectors and abundant primary supplies, while steel can recycling once again reached record levels.
By Robert J. Garino
Robert J. Garino is director of commodities for the Institute of Scrap Recycling Industries (ISRI) (Washington, D.C.).
The past four years have been a hilly ride for the U.S. recycling rate of all-aluminum used beverage cans (UBCs), and 1993 was another dip in the road.
After rebounding strongly from the last-recorded drop in 1991 to hit a record 67.9-percent rate in 1992, UBCs stumbled in 1993, registering a 63.1 -percent recycling rate in the United States, according to a joint survey by ISRI, the Can Manufacturers Institute (CMI), and the Aluminum Association, all based in Washington, D.C.
Steel can recycling, on the other hand, continued its upward climb for the fifth straight year, with preliminary figures indicating a national steel can recycling rate of around 50 percent, up from 1992's 40.9 percent. This was despite the fact that steel beverage can shipments were off 14.5 percent for the year at 2.494 billion units, CMI reports.
Where, Oh Where, Are the UBCs?
So what happened to UBC recycling in 1993? Most processors say that relatively low scrap prices last year inhibited the scrap flow, but, they maintain, cans were still collected and processed. These processed cans, they believe, were simply held off the market in anticipation of higher prices-that is, rather than being lost, they were diverted into inventory.
A similar situation occurred in 1991, when the UBC recycling rate slipped from 1990's 63.6 percent to 62.4 percent. That year, lower domestic aluminum consumption, diminished scrap consumption, and an oversupply of prime metal from the former Soviet Union combined to help send the average price of prime aluminum (as reported byMetals Week) down 20 percent. Prices for UBCs followed suit and the scrap flow diminished, contributing to the lower UBC recycling rate.
This market situation changed for the better in 1992. Prices of prime aluminum and, hence, UBCs improved in the first half of the year and sheet mills resumed their steady buying, both of which helped bring about the record 1992 recycling rate.
The aluminum market continued to show promise into 1993, with January prime averaging 56.13 cents a pound, Metals Week reported, and UBC tags rising to 40 cents a pound (Alcoa basis bales, fob shipper). These numbers didn't hold up for the rest of the year, however, as certain market dynamics came into force. These included some hedge buying in anticipation of potential labor strikes at aluminum producers and can manufacturers, continued exports of aluminum from the former Soviet Union, and less-than-robust can sheet sales. As a result, UBC values finished the year at 33 cents a pound (see figure on page 92).
Some say the 1994 UBC market could be a repeat of 1992 in one respect: If aluminum prices improve-as, in fact, they have-large volumes of prepared cans could appear on the market in the first half of the year, similar to what occurred in 1992.
UBC Consumption Also Rolls Downhill
In 1993, all principal UBC consumers in the United States decreased their can consumption. The sheet mill industry, for example, which generally accounts for more than 90 percent of U.S. UBC consumption and includes integrated can manufacturers and independent aluminum minimills, used around 4 percent less can scrap last year than in 1992, ReMA data indicate.
Looking specifically at the major integrated producers, Aluminum Co. of America (Alcoa) (Pittsburgh)--the largest domestic consumer of UBCs--reports that it only melted 16.7 billion cans in 1993, 13.5 percent less than in the previous year. Meanwhile, Reynolds Metals Co. (Richmond, Va.) used 6.8 percent fewer cans in 1993 than in 1992, though Alcan Aluminum Corp. (Cleveland) consumed 7.8 percent more, making it the only one of the top-three producers to post a UBC consumption increase (see table above).
One reason for this decline in consumption is that UBCs are only one scrap feedstock and, therefore, must compete with other aluminum scrap and prime metal. "If cans aren't price-competitive, they're simply not bought," explains John Stone, Alcoa's scrap metal manager.
Secondary aluminum smelters, normally not aggressive buyers of UBCs, also used less than in 1992, ReMA data show. Exports and destructive uses--such as steel deoxidizing and chemical manufacturing--were significantly lower too. In fact, these three sectors combined posted a decline of about 47 percent compared with 1992. The largest fall-off among them occurred in UBC exports, which totaled only 996 mt in 1993, a 71-percent drop from the 3,383 mt shipped in 1992, according to the U.S. Bureau of the Census. In addition, exports of remelt secondary ingot, which include an unknown proportion of UBCS, also fell in 1993 to 35,514 mt from 54,416 mt in 1992, Census figures indicate.
Steel Cans--A 50-Percent Recycling Rate?
While aluminum can recycling struggled through the year, the U.S. steel can recycling rate appears to have continued its steady climb in 1993. This recycling growth can be attributed to the thousands of curbside collection programs, drop-off/buyback centers, and material recovery facilities that now recover steel cans, says Bill Heenan, president of the Steel Recycling Institute (SRI) (Pittsburgh).
According to ReMA and SRI estimates, total steel container purchases by mills could show double-figure growth for 1993, though likely less than 20 percent above 1992's total of 1.135 million tons. Of that total, it's believed that 285,000 tons was used by integrated steel companies to make new steel cans.
Despite this positive news, there are concerns about inroads being made by aluminum containers at the expense of steel. According to a study by the Freedonia Group Inc. (Cleveland), aluminum will continue to supplant steel and bimetal cans as the preferred material for cans. Still, growth is forecast for both aluminum and steel for the 1992-1997 period, which bodes well for recyclers of all types of containers.•
The UBC recycling rate slipped in 1993, weighed down by weakness in key consuming sectors and abundant primary supplies, while steel can recycling once again reached record levels.