UBC--Another Look at 1986; A Hint of 1987

May/June 1988

Preliminary ReMA findings indicate that the 1987 UBC recycling rate may surpass 50 percent.

The market for scrap all-aluminum beverage cans is expanding--both domestically and internationally. Higher domestic prices in 1987, plus robust offshore demand for used beverage cans (UBCs), point to a record amount of aluminum cans recycled in 1987. Preliminary findings by the Institute of Scrap Recycling Industries (ISRI) indicate that the actual recycling rate for the year may surpass 50 percent--over three percentage points higher than in 1986.

These preliminary findings are from ReMA's latest Used Beverage Can (UBC) Consumption Survey, launched in January with the cooperation of the Aluminum Association and the Can Manufacturers Institute (CMI). The annual survey measures total cans reclaimed and defines a recycling rate for all-aluminum beverage containers. The survey includes UBCs consumed domestically as well as cans exported.

1986 Survey Reviewed

In 1986, well over 30 billion all-aluminum beverage cans were recycled--a record amount, according to ReMA's 1986 survey. ReMA reported that the number of cans per pound of aluminum increased from 26.6 in 1985 to 27.0 in 1986. The weight decrease, coupled with an increase in beverage can shipments, resulted in a final 1986 recycling rate of 47.1 percent.

Surveys for 1981-1986, conducted by one of ReMA's predecessor organizations, show that the last time the recycling rate fell below 50 percent was in 1982. In reviewing the 1986 data, industry sources noted "soft" prices for UBC scrap in the first half of 1986, which inhibited collection, and less scrap usage. Meanwhile, can shipments increased. According to CMI, aluminum can shipments in 1986 totaled 68.343 billion cans, up 5.3 percent from the 64.908 billion cans shipped between fourth quarter 1984 and fourth quarter 1985.

Record URC Prices in 1987

Because price so strongly influences collection and processing of scrap, record prices in 1987 may have encouraged more recycling throughout the collection chain. In fact, prices offered and paid for UBC in 1987 set all-time records.

The Aluminum Company of America (ALCOA) posted a price of 36 cents per pound at the start of 1987. Virtually every month, prices rose--hitting 61 cents per pound before the October stock market crash. Subsequently, the aluminum market cooled off through most of the fourth quarter, but by December, prices once again headed up. The year ended with UBCs quoted at 62 cents per pound, up 72 percent for the year. Prior to this, the highest price ever paid for UBCs was 57 cents, in August 1983.

ALCOA, probably the largest single consumer of UBCs, noted that its collections in 1987 reached 13.3 billion cans, up 12 percent from 1986. ALCOA reported a total of 504 million pounds of can scrap recycled last year, not including the recovery of new can scrap.

Another major can recycler and primary aluminum producer, Alcan Aluminum, reported that it recycled 5.6 billion cans last year. According to ReMA data, this, too, would be an increase over 1986. Alcan recently announced plans to build a new can recycling plant in Berea, Kentucky. This new facility is designed to produce annually 120,000 metric tons of rolling ingot, requiring 6 billion cans per year--substantially more than the entire company recycled last year. The Kentucky plant will be operational in the final quarter of 1989.

Secondaries Consume Less

Secondary aluminum smelters, once considered important UBC consumers, have continually taken a smaller share of available cans in recent years. Secondary smelter consumption was reported at 15,000 tons in 1981, but ISRI estimates consumption in 1987 at closer to 6,500 tons--and shrinking. The can market has changed significantly for the secondaries over the past several years, as primary producers have integrated backward and consistently offered prices higher than what traditional secondary smelters were willing to pay. Buy-back operations by primary producers began capturing a larger share, while tolling (the return of can scrap to the primary producer by can makers, in exchange for metal) augmented recycling growth. The net result is that can companies and primary producers are consuming a greater portion of the can scrap market.

So far, this change has not been particularly burdensome to the secondaries, who have found other aluminum scrap sources at prices lower than UBCs. Also, many secondaries actively sought alternatives to the can scrap, which contains relatively high amounts of magnesium. Said one Midwestern secondary, "UBC consumption by independent aluminum smelters may soon disappear altogether."

Expert Market Growing

As supplies to the primaries are increasing and less is being consumed by secondaries, the export market for UBCs is also growing. Official data released by the U.S. Department of Census reported that 2,975 tons of UBC were exported in 1987, an increase of 25.5 percent over the 2,371 tons reported in 1986. But this is not the whole story. In addition to reported UBCs shipped offshore, more than 59,000 tons of remelt secondary ingot (RSI) were exported in 1987--up 20 percent from the 1986 figure of 49,361 tons. ISRI believes that RSI, as reported to the Department of Census, includes significant amounts of melted-down UBCs.

ReMA's 1987 export figures differ substantially from Census Bureau data. Again, preliminary numbers obtained from the ReMA survey reveal an export market for UBCs closer to 22,000 tons. Most of that number is believed to be baled UBCS, but perhaps as much as 25 percent of that total was RSI. Clearly, Census Bureau figures on UBC exports understate the offshore market by a large degree. This dramatic statistical increase over 1986 (+220 percent) results from ReMA's expanded survey base coupled with strong offshore demand (particularly from Japan)--the latter being fueled by a failing U.S. dollar.

Exports of can scrap will remain an important feature, especially when imports of can-making stock continue to make inroads into market share. However, imports of can-making sheet were less attractive as 1987 wound down, again, because of the failing U.S. dollar. At the same time, record prices were being paid in the U.S. for can scrap.

1987 UBC Recycling Rate Up

From most published market indicators, 1987 was certainly an up year for aluminum: Total mill shipments went up, imports went down, and exports rose. Scrap usage also increased approximately 5 percent, according to Bureau of Mines data on old and new scrap melted or consumed. But what about UBCs?

Although ISRI did not have final scrap can consumption figures from the nation's sheet mills (the largest consumers of UBC), ReMA conservatively estimated an increase for that segment of the market. Added to this is the known consumption of UBC by the secondaries and other consumers (which, as mentioned, ReMA expects to be lower) plus exports.

Consequently, ReMA's survey may show that more than 36 billion all-aluminum cans were reclaimed last year. In terms of numbers of cans, that would represent an increase of more than 10 percent over 1986, establishing a new record. Netting out cans shipped abroad, and based upon a U.S. population of, say, 240 million, that translates to approximately 145 cans reclaimed for every man, woman, and child in the U.S.

The market for scrap all-aluminum beverage cans is expanding--both domestically and internationally. Higher domestic prices in 1987, plus robust offshore demand for used beverage cans (UBCs), point to a record amount of aluminum cans recycled in 1987. Preliminary findings by the Institute of Scrap Recycling Industries (ReMA) indicate that the actual recycling rate for the year may surpass 50 percent--over three percentage points higher than in 1986.