So I received an email today from our True Value sales representative about a very interesting topic, a shortage of aluminum cans. He sent along a report compiled from CEO reports and Credit Suisse …
So I received an email today from our True Value sales representative about a very interesting topic, a shortage of aluminum cans. He sent along a report compiled from CEO reports and Credit Suisse analyst about a shortage of aluminum sheet used for producing cans.
The report states that for the most part, the North American can industry is sold out for the next 24 to 36 months, and they don't see the supply chain catching up to real demand until 2025-26. Why can't they just make more cans?
Part of it is limited production capacity by the big can manufacturers, part of it is the surprising growth in cans, even the bottled water industry is turning to cans, and part of it is high demand for sheet aluminum from the automotive industry. And younger consumers view cans as a more environmentally friendly package compared to glass and especially plastic.
So who makes the cans? Ball has the dominant market share in the US market of 42%, Crown at 25%, Ardagh at 15% and Anheuser-Busch at about 13%, but all their production is for their own products and that only covers about 50% of their product demand. This product demand has been building for a while now.
Solid consumer demand for craft beer, hard cider, hard seltzer and energy drinks have fostered strong growth for new entrants utilizing the aluminum can. The number two US producer Crown sells most of their aluminum sheeting to the auto industry which has turned to lighter materials to produce more energy efficient vehicles. Also sourcing materials can be a challenge as well.
In an interview last year Ball CEO John Hayes stated, “At this time last year we had I think 5 metal suppliers in the United States. We have 19 now. And it's just because of the growth, there's lack of capacity here and all of these tariffs make you pinwheel your supply chain all over the place.” Ball's growth just in the last two years has been phenomenal.
In July 2018, Ball stock, NYSE: BLL, was trading at $35 per share and Tuesday's close this year they are at $93.75. So with this growth why not just build more manufacturing plants? The major can companies have collectively invested around $2.8 billion recently to expand production capacity, according to Credit Suisse, but build-outs and new facilities take time.
And consumers want their cans now, and they want them tall and slim, and the current can infrastructure just isn't built to provide them. Pretty good problem to have if you're in the aluminum can business. Pretty terrible if you are a craft brewer, cider company or other producer who needs cans pronto.
So what does all this mean for you? Well, remember that shortage of Ball canning jars this summer? It was all caused by the fact that the jar lids are all made by Ball on the same production line as their aluminum cans. With cans in such high demand, jar lids take a back seat. We have been able to get some canning jars back in, but the replacement lids are still on backorder from March, with no ETA as to when or if we will see them.
My recommendation, if you are someone who cans, stock up on lids whenever you can find them. The glass jars can be found at yard sales everywhere if there is a shortage of them, but if you don't have the lids the jars are of no use. Hopefully, lids will be available before next summer's canning season, but if are looking for some now to make craft Christmas items, you may be out of luck.