US consumers of used aluminum beverage can (UBC) scrap have felt little spot market impact so far from the bankruptcy of RePlanet, the largest plastic and metal container redemption center in California.
The US market is oversupplied with every major category of aluminum scrap, including UBCs, limiting any jarring effects from the sudden closure. Deposit states such as California, which pays individuals 5¢/can for returning UBCs, are an important source of scrap to aluminum rolling mills.
Rolling mills that receive contract UBCs from California have found it easy to go into the US spot market and replace any shortfalls with alternative suppliers. Most US scrap dealers have welcomed the new business, having struggled to find nearby delivery appointments.
Argus' weekly assessment for UBC buying spreads has been little changed over the last month at about 56pc of the Midwest transaction price for P1020 primary aluminum.
Buyers with agreements to take millions of pounds of UBCs per month at spreads of more than 60pc of the Argus Midwest transaction price from RePlanet are now able to replace formula UBCs at much wider spreads of around 56pc, or current spot prices.
"I don't think [spot spreads] are going to change. Alcoa is not taking the 4mn lbs they used to," one mill said. "There's just going to be a glut of material until someone consumes more or there's a reason to increase mill capacity."
Aluminum can sheet producer Alcoa has not been actively buying UBCs on the US spot market this year as it is now only supplying its Warrick, Indiana, rolling mill. Before it spun most of its rolling assets off into Arconic in 2016, the company consumed many more UBCs. Arconic does not make beverage can sheet.
"If there were earth-shattering things happening, we would hear about it in the market place. This is more like a hiccup," said a western US mill scrap buyer.
Future impact
California's robust redemption incentives should prevent UBCs that were flowing to RePlanet from being landfilled or stranded and unavailable to mills.
"We are hearing that the volumes are finding their way to other processors in the California market," a major national UBC broker told Argus.
Though the company did service "lower population markets" that depended heavily on them for a place to recycle plastic and cans, "a high percentage will be captured [by other dealers]," he said.
RePlanet's absence could make US UBCs contract negotiations more complicated for 2020. But nationally, aluminum scrap supply is expected to remain more than adequate in the mid-to-long-term.
The Canada-headquartered company closed all of its 284 California locations on 5 August, citing "the continued reduction of state fees" and market conditions for aluminum and PET plastic recycling.
RePlanet operated small, purpose-built facilities, many inside shipping containers, in hundreds of locations near grocery stores in California. The company was not a full-service scrap dealer and collected only glass, metal and plastic containers.
