by MAURA KELLER
mkeller@americanrecycler.com
The aluminum recycling industry is showing improved conditions, leading recyclers to feel upbeat about the future of the market as the expectations for recycled aluminum demand is on the rise. However, according to Joe Pickard, chief economist and director of commodities at the Institute of Scrap Recycling Industries, aluminum recyclers have faced a number of challenges this year – such as downward price pressure in the first quarter across the aluminum supply chain, including the Midwest aluminum premium and recycled aluminum products.
“In terms of domestic market conditions, transportation issues and trucking, in particular, are still a major factor – although some market participants report that transportation bottlenecks have been improving,” Pickard said. “The economy overall and recycled commodity markets are still recovering from some of the longer-term impacts of the pandemic, including labor shortages, supply chain disruptions, and rising costs.”
Market conditions improved significantly in the immediate aftermath of the pandemic, but more recently, the industry has seen a slowdown in U.S. manufacturing output and rising interest rates that impact end-use demand of aluminum.
“Global factors are also playing a part as sanctions have been imposed on Russia (a major aluminum producer) including 200 percent tariffs on Russian aluminum imported into the U.S.,” Pickard said. “Market participants remain concerned that Russian aluminum producers are dumping large volumes of aluminum – including into London Metal Exchange (LME) warehouses –that could further depress prices.”
As Nick Mize, vice president of global recycling at Novelis, a global leader in the production of innovative aluminum products and solutions and the world’s largest recycler of aluminum, explained, the aluminum recycling market has always been a strong one, given the value of aluminum.
“As companies and consumers become more concerned with sustainability and carbon reduction, the focus on aluminum recycling continues to increase. Novelis’ and the entire industry’s investments attest to this trend,” Mize said.
Novelis has invested more than $1 billion in recycling assets since 2011, including the ones being built now in Guthrie, Kentucky, and Bay Minette, Alabama. When the recycling center in Bay Minette comes online, Novelis will be able to recycle an additional 15 billion used beverage cans (UBC) each year.
“But our efforts alone cannot fix the general industry problem. The entire value chain needs to come together to ensure more scrap availability,” Mize said. To do this, the industry needs to make sure aluminum stays out of landfills and instead is recycled. And, ideally, the aluminum is recycled back into the same high-value product and not downgraded into a lower-value application.
As Mize further pointed out, U.S. recycling rates lag far behind the rest of the world. The beverage can recycle rate in the U.S. has stagnated around 50 percent for the past 20 years, a stark contrast with other countries such as Brazil, Germany and Finland that have successfully increased recycling rates to 98 percent or higher. In the U.S., approximately $800 million worth of aluminum goes to landfills each year.
“There is less cultural emphasis on recycling for many American consumers, however we need to take a page from the rest of the world,” Mize said. “Perceptions around recycling need to change, especially as much of the actual recycling is done in the U.S., creating jobs, adding economic value for the country and lowering carbon emissions.”
This is why Novelis, continues to build more recycling assets. The environmental and economic benefits of increasing aluminum recycling are undeniable.
“Increasing the aluminum recycling rates to 90 percent in the U.S. would generate billions of dollars for our economy and add tens of thousands of jobs,” Mize said.
Bjørnulf Østvik, the chief executive officer and founder of Ecogensus, a company focused on delivering sustainable waste management solutions, said that just as was the case with plastics recycling, the scrap aluminum market in the U.S. has grown to become quite dependent on exports.
“Although there is increased demand from some countries, sharp decline in demand from big markets like India and Mexico have caused an imbalance in supply and demand,” Østvik said. “There was a year-over-year decline in U.S. exports and this trend was continuing through the end of last quarter.”
According to Mark Leder, co-owner Leder Brothers Metal in Minneapolis, the aluminum market is open and functioning, things seem balanced, and there are not large price moves, rather just incremental moves.
“Scrap is being produced and it’s being consumed. There doesn’t seem to be any big pushes for material – just the ability to sell what you want. Although delivery appointments sometimes are further out than what makes for easy business,” Leder said.
Østvik added that a lot was going on in 2020 that created some challenges. Østvik’s understanding is that there was a sharp drop in collections of used cans that actually created supply issues.
“So, even though the absolute volumes of waste – and recyclables – didn’t necessarily decline (although it shifted to residential origins), can collection was affected. There had been a demand transition going on in the U.S. away from can sheet and toward automotive sheet – this was occurring in 2019 already – but it was still underway and the pandemic came at a difficult time,” Østvik said.
Leder further pointed out that the pandemic not only hurt world economies but with transportation, employee illness and employee reluctance to participate outside of the home for work, the ability to move scrap was difficult.
“Production facilities (the mills), at the height of COVID had extremely tough weeks of trying to function, resulting in sluggish pricing and reluctance to purchase material at the rates prior to the COVID pandemic,” Leder said.
From a U.S. perspective, Østvik pointed to the production of aluminum in Asia and the Middle East, which is depressing prices and a continued reliance upon export markets and creates risk for domestic recyclers.
“The absolute global demand for aluminum is rising though, with shifting trends in some product categories away from plastics and to aluminum,” he said. “There is an opportunity for recyclers to focus on innovations that bring costs down and to work with manufacturers on new applications that can spur demand.”
Ongoing Initiatives
Organizations are using innovative techniques to entice consumers to recycle aluminum. For example, Proud Source Water and Replenysh recently launched The Infinite Bottle Project at Hyatt Centric Key West to raise funds to support protecting the barrier reef off the coast of the Florida Keys. The initiative will reclaim and recycle aluminum collected on the Hyatt Centric Key West property and the surrounding Key West community. One hundred percent of the funds received from the recycled aluminum will be donated to protect and preserve the largest barrier reef in North America.
“We have a responsibility as a consumer-packaged goods company to collect what we put out into the world,” said CJ Pennington, president of the Proud Source Water, in a recent press release. “The Infinite Bottle Project is a progressive and innovative program designed to promote true circularity, as aluminum collected at Hyatt Centric Key West and every future partner is infinitely recycled, including some eventually becoming Proud Source Water bottles.”
To date the project has collected nearly 400 pounds of aluminum for recycling and continues to track the progress to ensure all aluminum cans and bottles collected are sorted properly so they can be recycled and reused.
Looking Ahead
Leder expects further consolidation in the aluminum recycling industry whereby more mills are owned by large groups, and investment bankers will put deals together and then, after a period of 8 to 12 years, these will be sold to another group.
“There is no question that we will still have an aluminum recycling industry,” Leder said. “I think the companies that remain will be larger, rely on technology as opposed to the friendly face that you recognized visiting your facility.”
That said, there’s room for improvement on the recycled aluminum production side in terms of environmental impact. “As relative costs are improved for the overall recycling market – and they can be through innovation – that will provide an opportunity that will spill over to the aluminum recycling industry as well,” Østvik said. “I think the more powerful lesson for U.S. recyclers here is that the business model cannot rely upon scrap sales to international markets – this was a problem for plastics (and remains one) and we see it in aluminum recycling too.”
Looking forward, Pickard said there are significant aluminum production capacity expansion plans underway, with CRU noting planned greenfield projects and brownfield expansions will add 11 percent rolled products capacity as the new mills begin to come online in 2025 to 2029.
Both Novelis and ADI also have broken ground on their new facilities and this is expected to increase domestic demand for recycled aluminum.
“As a result, an increasing share of the aluminum recycled in the U.S. is likely to go to domestic mills, as compared to export markets. U.S. exports of recycled aluminum, including used beverage containers and remelt scrap ingot, during January through February 2023 slipped 0.6 percent year-on-year to 319,104 metric tons on weaker demand from India, Mexico, Hong Kong, and Indonesia,” Pickard said. “In a reversal of last year’s pattern, Malaysia reclaimed the top destination spot for U.S. recycled aluminum exports during January through February 2023 with shipments totaling 61,760 metric tons, a 13.1 percent increase from the corresponding period last year. Besides Malaysia, other growth markets for U.S. recycled aluminum exports during the first two months of 2023 included Thailand (+127 percent), Taiwan (+114 percent), and Japan (+21 percent).”
In contemplating the furthering of the aluminum recycling market, Mize said investing in innovative technologies around sorting and segregation is essential, as more material segregation is needed to preserve the value of alloys.
“In the automotive industry, end-of-life recycling is a source for scrap that has not been explored yet at its full potential,” Mize said. Combined with sorting technology, the separation into the appropriate material value streams, including wrought, cast and extruded products, allows for less prime and reduces the industry’s overall carbon footprint.
“We continue to research and innovate more recycling-friendly alloys that can incorporate higher recycling content without changing specifications,” Mize said. “And ultimately, designing for dismantling means building with circularity in mind and allows for seamless recycling after disassembling.”
As published in June 2023 issue of American Recycler.