CRU Aluminum: Rolling Mill Investments Beg for a Recycling Solution

This month, the market has seen two new projects announced in the flat-rolled aluminum product sector:

• Novelis will spend $2.5 billion for a new state-of-the art rolling mill in Bay Minette, Ala.

• Ball Corporation will partner with investment firm Manna Capital Partners to build a new can sheet mill in Los Lunas, N.M.

The Novelis mill will be 600,000 metric tons per year to supply the beverage can and automotive markets and aims to be net carbon neutral on Scope 1 and 2 emissions. It is expected to come on-steam in 2025.

As part of the investment, Novelis will have recycling and casting capabilities to support the finished output. That should mean about 800,000 tons implied slab production (assuming a 75% recovery). Novelis has staked out an aggressive goal on its emissions and that translates into more demand for scrap.

If we extend the implied slab requirement back into scrap it implies the need to buy 675,000–685,000 tons of scrap at a 75% recycled content.

The Ball/Manna mill has undisclosed capacity and will ramp up in 2026. It will follow the trend toward high recycled content. The partners’ press release of May26 underscored the importance of finding more scrap to feed the mill. “Further investment in used beverage container (UBC) recycling infrastructure is anticipated to supply the rolling mill with enough scrap material,” the release said.

Modern aluminum beverage can sheet has over 75% recycled content. The technology has been demonstrated that this could be taken to 100%. A great deal of this content is derived from UBC scrap, complemented by process scrap coming back from can making operations. A typical can plant generates about 16–18% process scrap when producing cans.

Ball/Manna’s announcement on the heels of the Novelis decision means the market really needs to come to grips with how to substantially raise the UBC recycling rate from its present 46% rate.

What is holding back UBC recycling rates?

The path to sustainably high UBC recycling rates has been painfully slow. Despite the demonstrated success of deposit schemes in 10 states and in many foreign countries, there has been widespread opposition to deposits on a national scale in the US.

Opponents to deposits have clung to the notion that deposit schemes represent a tax on the consumer and hurt retail sales. There has never been definitive evidence to support this and in fact, two of the largest retail markets in the US—California and New York—have deposits in place and they don’t seem to be suffering.

A host of alternative ideas have been employed over the years to boost recovery:

• Curb side collection: creates convenience for consumers to voluntarily return cans; these programs work but suffer from a lack of funding to make them expansive enough and quality is still uneven

• Extended Producer Responsibility (EPR) schemes: brand owners pay for the recovery of UBC; this has proven to be marginally effective but has been managed by the public sector, not the private sector, which many argue has proven to be inefficient deployment of the brand owners’ capital

• Reverse vending machines at point of sale: incredibly expensive systems relative to the volume collected

• Commercial, industrial, and cultural venue collection: high visibility but has failed to deliver any real volume and thus is expensive

• Voluntary drop-off collection: requires an active consumer decision and that has not proven to drive incremental supply up over time

• Commercial incentives: e.g., buying cans from consumers interested in earning money; despite high(er) prices in some given years, this has not appreciably raised supply

• Appeals to people’s sense of environmental responsibility: that simply is not moving the needle, millennials will eventually control the economy and instil this in our culture…but that is not going to deliver more UBC to the likes of Novelis and Ball soon enough

How do we end this impasse?

All the stakeholders need to stop counting each other’s money and work for a common cause.

Deposits work. The recovery rates conservatively should be 75% under a national deposit regime. That would deliver a massive increase in supply. That supply would also be price inelastic, coming back for the deposit refund, not price.

A significant increase in supply which is not price sensitive should be a dream to all stakeholders. It comes down to how the sheet mills, can makers and the can buyers decide to divide up the savings so that each stakeholder gets the return on its invested capital in their part of the supply chain.

Deposits in their present form do not appeal to the brand owners because they don’t see the benefit accruing to them in the form of lower can sheet or can cost. They see the benefit accruing only to the sheet mill buying the UBC from the market.

This is why the hybrid model of Extended Producer Responsibility (EPR) is getting traction. Hybrid EPR would have everyone in the supply chain sharing in the cost of deposits and other recycling programs in exchange for direct control of the supply.

In any business enterprise, partners need financial incentives to participate. Finding a means to equitably share in the savings from a hybrid EPR/deposit scheme may be the recipe needed to satisfy the demands from these two new mill projects. It’s time for the respective parties to get serious about solving this.

For more information about this topic, contact the author at gregory.wittbecker@crugroup.com

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