2018 Review – Let us seize the day
Richard Moore reviews 2018 and the current issues facing the can making industry, with a passionate plea that the metal packaging industry is facing its ‘carpe diem’ moment.
In 2018 our industry has faced headwinds from a new quarter. As if it wasn’t enough dealing with the evermore demanding markets, competing materials and consumerist scares based on bad science, we know have to deal with pressures emanating from governments.
A new trade war and taxation issues
The year began badly with Donald Trump forcing through new tariffs on imports of steel and aluminium into what is still by far the largest volume market for metal packaging in the world. Contrary to some Republican senators’ expectations, this resulted in a rise in all metal prices, including domestic manufacture. As the US steel industry does not supply the whole range of specifications needed for cans (wide coil steel DWI for instance), the measure was of doubtful use anyway.
Then came the tit for tat tariff war between the US and China. The first US wave was aimed at industrial machinery, snaring up most can making and filling equipment in its path, and the second wave a whole range of consumer goods, including metal cans, ends and glass bottles. The next threatened wave would cover all of China’s exports to the US, with damaging effect on both sides, including US companies with production facilities in China.
The US has also pulled out of its international agreements with Iran, re-imposing sanctions that were removed six years ago, and killing off the prospects of creating a modern consumer market to meet the needs of this young and dynamic population.
Taxes on soft drinks opened up another Government-inspired headwind, with many more countries taking advantage of the opportunity to fill state coffers under the cover of good intentions. The actual impact has been variable. In France and more recently the UK, the new taxes were intelligently devised and implemented, resulting in a reduction in sugar content and a massive switch to low or no sugar beverages. Mineral water and ‘water plus’ drinks have grown sharply, and the volume of the overall market for soft drinks has hardly been impacted.
On the other end of the scale, Saudi Arabia and the UAE have introduced heavy taxation indiscriminately on all soft drinks, regardless of sugar content, and overall sales fell sharply.
In Thailand, the new taxes are proportional to sugar content, and are being introduced gradually, with no visible effect so far on overall consumption. In the Philippines, the new taxes have fallen heavily on soft drinks using corn syrup, with a resulting drop in sales volumes on high volume, low-cost brands such as RC Cola.
There are now eleven countries and five US states with sugar taxes in place, and several more considering introduction in the months to come, with no guarantee that the intelligent models will be chosen and overall soft drinks volumes protected.
An opportunity within the gloom
Against all these headwinds, the industry is fortunately faced with one favourable wind which outblows them all – the fall from favour of plastic packaging. Plastic packaging has been the darling of marketing departments for many years; the material with its bright colours, light weight, soft touch and distinctive shapes, that was going to replace old-fashioned metal and other traditional substrates.
And then came David Attenborough’s Blue Planet II, the most watched TV programme in the UK in 2017, seen millions of times, not just in the UK, but around the world. The evidence of the pollution and damage caused by plastics to marine life, and the fact that the plastics are steadily accumulating without being recycled, came as a shock to consumers and has been responsible for a complete reversal of plastic’s previously favourable image. There is always a lag between a change in perception and actual changes in behaviour, and the plastics apologists can always point to evidence of continuing growth.
But there are signs that changes will be happening soon. The UK is considering a plastics tax; the European Parliament recently passed a bill advocating the phasing out of single use plastic packaging by 2025, a Dutch supermarket chain has a non-plastics corner in its 93 supermarkets and (my personal favourite) plastic bottles have been banned in all of the Queen’s properties in the UK.
The fact is that there is no easy path for today’s consumer to switch out of plastic, which has become useful and even indispensable in everyday life. It is difficult to see how the largest volume plastic packaging item by far, the omnipresent two-litre plastic bottles of mineral water, can be replaced by metal, glass, or returnable plastics. As for recycling, current rates are low, because unlike glass and metal, it has no economic value.
The plastics producers are clearly in a near impossible situation, complicated by the fact that today, the producers are mainly the brand owners and fillers themselves, who integrated blow-moulding and even preform production into their internal systems long ago (and virtually wiped out the PET bottle industry in the process).
How do we capitalise?
This is undoubtedly a major historic opportunity for metal packaging. Metal has very high recycling rates worldwide, and recycled metals have a high economic value. Post-consumer aluminium scrap today has a value of about 60 per cent of the LME, so around $1,200 per tonne. Plastic waste used to have a value of $20 per tonne, but now you have to pay $10 per tonne to have it taken away, not surprising perhaps now that the Chinese have all but stopped importing any plastics for recycling.
Plastic packaging is of course supported by its low cost. But what would happen if it had to support the real cost of recycling? It’s time to end the gentlemanly agreement prevalent in many countries which spreads the cost of recycling over all materials, which essentially means that metal is subsidising plastic. True costing would significantly narrow the cost gap between the two materials and would let economic forces contribute to solving the recycling problem.
The vast scale of the PET bottle consumption means that even ‘small crumbs’ from their table will have a dramatic effect on metal packaging volumes. The most immediate targets are the growing single-serve sectors: flavoured mineral waters, low or no sugar fruit beverages, ready to drink herbal teas, protein drinks. Why should any of these be in plastic?
How they can have a ‘new age’ image when their plastic bottles can be seen floating down the river or in the mouth of a suffocated seabird?
To take advantage of this opportunity, the industry does not need to spread negative press on plastics; the damage is self-inflicted and needs no emphasis. But it should stress the multiple benefits of metal, not just in recycling, but also in metal’s growing ability to match plastic’s features: shaping, lightweight, soft touch and other special textures, photographic quality images and colours, re-sealability.
At SLAC we stand ready to help can makers seize the opportunity. Many of the new market opportunities are likely to be from smaller volume ranges, with many variants, in average run sizes which in the past would have precluded DWI. For this reason, SLAC has developed mini-line concepts around SLAC’s new digital printer, which lowers the traditional volume threshold for DWI and opens up low-cost opportunities for annual volumes of 75m cans, ten times less than the generally accepted minimum for conventional DWI. New age soft drinks, craft beers, flavoured mineral waters, monobloc aerosols and printed food cans could all benefit from this new approach. One of the mini-line concepts is a completely stand-alone line using Tata’s Protact laminated steel, the result of a joint project between the two companies to develop a DWI line with a small footprint.
And finally, we are striving to make technology access easier by moving to the next level of line productivity. Inspired by the extraordinarily intelligent methods developed by bees over millions of years to produce honey efficiently, The Hive Initiative is SLAC’s project to develop machine intelligence in the world of can making. Most modern lines already have sophisticated equipment for tracking the quality of the can as it is produced in-line, usually through vision systems. With The Hive Initiative, this will be extended to tracking the equipment itself, on all of the multiple critical control points that define ultimate quality.
It’s time for the industry to take advantage of current market conditions in the packaging sector.