Staying resilient

Dylan Carter provides an update on Ukraine’s can manufacturing industry amid the country’s ongoing war.

The metal packaging industry in Ukraine, once a growing sector with strong domestic and export markets, has been pushed to its limits since Russia launched its full-scale invasion in February 2022. A war that Ukraine’s government says has killed 43,000 Ukrainian soldiers and 198,000 Russian soldiers has also disrupted but not devastated the Ukrainian economy.

As far as can makers are concerned, a total halt to production in some eastern regions at the start of the invasion has been reversed, with metal can manufacturing facilities close to areas of active conflict, both foreign and domestically-owned, are now operational. Despite this, companies still face disrupted supply chains, workforce challenges and fluctuating demand.

Before the war, Ukraine’s metal packaging market was valued at US$206 million in 2021, considering domestic sales of metal packaging primarily serving the food and beverage sectors. According to Ukraine’s Packaging Information and Analytical Centre, Ukraine produced around 900,000 to 950,000 tonnes of glass bottles and metal cans annually before 2022. This is much less than in other European countries, with Ukrainian consumers (in a country of 38 million people in 2022) typically using two-and-a-half times less packaging than their European counterparts, according to the analytical centre.

In Ukraine, canned food staples such as vegetables, soups and legumes are widely consumed. Ukraine also has traditionally exported significant volumes of canned steamed or vinegared vegetables to European and global markets. According to the Ukrainian Business and Trade Association, in January 2022, one month before Russia’s full-scale invasion, Ukraine produced 2,633 tonnes of canned fruits, vegetables and beans, much of which was exported. However, by March 2022, overseas sales were severely disrupted by the invasion, with producers shifting their focus towards the internal market.

Image: Dylan Carter

Challenges on the frontlines

The continued effects of Russia’s bombardment of civilian infrastructure, including energy supplies, have caused significant disruption to the food and beverage packaging industry. According to the Kyiv School of Economics, damages to Ukrainian infrastructure caused by Russian bombing cost around $157 billion as of January 2024.

Enterprises producing materials critical to packaging have faced significant damages. For example, the factory of Swedish-Ukrainian food processing company Chumak, in the Kherson region, a major producer of ketchup, mayonnaise and canned vegetables, was looted by Russian forces in 2022, when its troops occupied the region. Its vehicles, manufacturing equipment and stocks of finished products were stolen. Similarly, PepsiCo Ukraine’s factory in the Mykolaiv region, which produces fruit juices under the brand Sandora, suffered extensive damage.

Dr Veronica Khalaydzhi, president of Ukraine packaging sector association, Club Packagers of Ukraine, which represents manufacturers of packaging materials, packaging and equipment, highlighted examples of the war’s toll to CanTech International. The Coca-Cola Beverages plant in Velyka Dymerka, near Brovary, on the outskirts of Kyiv, she noted, was shelled and remained under Russian occupation for nearly a month. Enterprises in initially occupied areas, such as those in the Kherson, Sumy and Zaporizhzhia regions, temporarily ceased operations. However, those in liberated areas have gradually resumed production.

For Amsterdam, Netherlands-based multinational metal packaging solutions company, Trivium Packaging, which produces cans for the food sector and operates three facilities in Ukraine, the situation has been “mixed,” according to Ajeeth Enjeti, the company’s general manager for the food business in Europe.

While demand for metal cans surged, particularly for use by soldiers on the frontlines, production has been limited by logistical barriers and the conscription of workers. “Many employers had to work with temporary staff due to supply chain restrictions and the conscription of staff into active service,” Enjeti noted.

Trivium has largely avoided direct Russian military damage but has faced production interruptions caused by power outages and air raid sirens. “Despite all the odds, our teams have persevered and continue to serve their customers,” said Enjeti.

Nizhyn Cannery, one of Ukraine’s largest vegetable processors, located just over 100km north-east of Kyiv, faced similar challenges. Marketing director, Anastasia Yaroshovets, told CanTech that the city of Nizhyn was surrounded early in the invasion. After liberation in April 2022, the cannery resumed operations, achieving 100% of its sales plan in 2023 with 28% growth compared to the previous year.

Shifting supply chains

Logistical challenges caused by the war have significantly disrupted the supply of raw materials and the export of filled containers of products. Much of the Kherson region (the section south of the Dnieper River), once a key supplier of vegetables for Nizhyn Cannery, remains under occupation, forcing the company to find replacement suppliers from other regions. Companies producing packaging for food, beverages and chemical products have had to adapt quickly to wartime conditions. Flexible retort packages made of multilayer polymer materials, sometimes with metal foils, often imported into Ukraine, have become widely used by the Armed Forces of Ukraine.

Traditional land export routes for finished goods have also been blocked, particularly through Poland, Hungary and Slovakia, partly through opposition from local farmers to Ukraine exports. Russia’s invasion had an immediate effect on the sector, with the metal packaging market contracting by 44.8% in 2022 to $113.76 million, according to Ukraine’s Pro-Consulting group.

Imports of metal packaging rose by 82.9%, exports plummeted by 56.1% and domestic production dropped by 51% in the same period, said Pro-Consulting. Rising raw material costs, partly due to international sanctions restricting Russian metal sales, added further strain. Aluminium imports to Ukraine, essential for can production, reached $366.46 million in 2023, making the sector reliant on its international suppliers, with exports much lower at $97.61 million.

Ukraine supermarket supplies have continued to flow throughout the war – here a mixture of western and Ukrainian labelled canned goods.
Image: Dylan Carter

Market resilience and export revival

Despite these challenges, Ukraine domestic demand for canned goods has recovered and remains steady. Wartime needs have driven demand for non-perishable food supplies, particularly metal cans used for rations for soldiers and even makeshift oil burners for the frontlines.

Dr Khalaydzhi highlighted a remarkable increase in Ukraine’s export performance in 2023. According to the State Statistics Service of Ukraine, the country’s exports of finished food products rose by 31% year-on-year to $3.27 billion. Categories such as beverages and preserved meat, all with significant canned segments, saw significant growth in overseas sales. Additionally, Ukraine exported not only packaged food products but also metal packaging itself, including ferrous metal cans used for preserving food.

During wartime conditions, Ukraine’s canning sector has focused on the basics. Khalaydzhi said that 46% of metal cans made in Ukraine are now used for canned food, 31% for sealing goods, 22% for packaging chemicals and just 1% for sealing souvenirs and other novelty items. Beverages and vinegar exports (many sold in cans) grew by 38.3%. “This demonstrates Ukraine’s strength as a producer and exporter, even in times of crisis,” Khalaydzhi emphasised.

Trivium Packaging also sees new opportunities on the horizon, should peace be secured. As Ukraine moves closer to European Union (EU) integration, the government has identified metal processing as one of six industries with robust growth potential. “This is generally good news,” Enjeti commented. “But for the overall metal processing industry to evolve and grow, supply chains and productivity will be critical to win in a competitive landscape.”

There is still room for future developments in the sector, particularly aided by increased Western investment. Significant development of Ukraine’s fledgling recycling sector could help bring material costs down for the sector.

Currently, only about 5% of waste, including aluminium cans, is recycled domestically, with large volumes of scrap exported to Turkey. According to Ukraine’s National Institute for Strategic Studies, the destruction caused by the war has created a surplus of aluminium scrap that could potentially reduce reliance on imports if domestic recycling infrastructure is expanded.

New investments are already coming to the sector. This year, a new metal packaging plant will open in Tenopil, operated by Sumy-based metal packaging manufacturer Favor, one of Ukraine’s largest metal food packaging companies. The project is expected to create 150 new jobs.

While challenges like power outages and logistical barriers persist, there is cautious optimism among industry partners. Khalaydzhi and the business representatives noted significant competition remains because of increased demand for plastic packaging, which has become increasingly requested by Ukraine’s armed forces – now with 980,000 personnel, said the government in January.

However, with increased investments, a growing focus on EU integration, and the prospect of better recycling infrastructure, Ukraine’s metal packaging industry may emerge stronger and more competitive than before, should the Russian invasion be halted or reversed for good.