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Covid impact on metal food and beverage cans

covid impact on cans

Covid-19 Impact on the Metal Food and Beverage Can Market

These include 2 and 3 piece cans

A massive shift in demand can be observed in the sales of various products, such as high-priced fruits, vegetables and canned foods and meat products. Consumers would steadily move towards buying groceries and fresh vegetables and fruits, which, in turn, will drive demand for certain packaging materials. Stockpiling and panic buying of food and beverage products due to the ongoing pandemic scenario is expected to benefit manufacturers of packaging and related services. However, demand for premium, non-food and high-end items is expected to decline due to low consumer demand and spending activities. Therefore, 2 piece packaging would generate higher demand due to its easier manufacture and use in food and beverage packaging.

 

It is the metal food and beverage cans market can be segmented mainly into steel and aluminum.

In recent years, the use of steel in beverage packaging has declined due to the beneficial properties of aluminium. The raw materials used in the manufacture of these metal cans include bauxite and iron ore. Major countries with bauxite reserves include Australia, Vietnam, Brazil and Indonesia. Similarly, two of the main producers of iron ore are Australia and Brazil. Mining and metal processing activities in these countries were hampered due to the pandemic and also due to reduced end-user demand. The industry has also been affected by isolated cases of infections, mine closures and logistical disruptions.

The aluminium industry experienced a price drop of around 3.8% during the first quarter of 2020. Global aluminium demand is expected to contract by 5.4% in 2020, followed by a prolonged period of slow and staggered recovery, according to the International Aluminium Institute. China’s aluminum demand is anticipated to recover by 2021, and a strong recovery to the pre-COVID era level is projected beyond 2022. For other nations, aluminum demand is expected to follow slow growth by 2021. The steel industry was also severely affected due to blockages caused by supply, demand and financial shocks, high uncertainty in demand from the respective end-use industries and social distancing measures. According to the World Steel Association, the industry is expected to experience a decline of around 6.4% in demand in 2020. The industry is forecast to witness around 3.8% growth in 2021. In a post-COVID scenario, steel demand is expected to improve due to easing of social distancing measures at workplaces, recovery in demand, government stimulus packages and restoration of investor confidence.

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Demand for both aluminum and steel will rebound strongly as the world returns to some form of normalcy, with some manufacturing units in Europe already cleared to restart operations. The medium to long-term demand outlook remains positive, with attractive growth activities in several aluminium and steel end-use sectors, such as food and beverage, automotive and aerospace.

The overall impact of COVID-19 on the packaging industry can be differentiated into 3 stages:

step 1

Stage 1 is the early shock period. In this period, consumer demand changes, which points to lower sales of certain products such as industrial equipment and devices, which are related to industrial activities and GDP. Packaging related to these industrial products would also decrease due to lower requirements. On the other hand, the food and pharmaceutical sectors are expected to experience significant growth in demand due to the effects of stockpiling and panic buying, which will increase packaging requirements.

step 2

Stage 2 of the impact would be the period from a few quarters to more than a year. At this stage, countries would focus on controlling the pandemic. In this period, the effect of hoarding and panic buying is expected to reduce, but grocery shopping through e-commerce would grow. Demand for non-food and high-priced items would decrease and demand for low-cost food and beverages would increase. At this stage, packaging producers must also be wary of changing packaging requirements for substrates that address improved hygiene and safety, i.e. minimise the chances of virus transmission through the packaging. In addition, there is expected to be a high demand for low commodity sales prices from end consumers as well as throughout the packaging value chain. Companies should implement appropriate strategies and action plans to protect themselves in this scenario. Countries would also need to prepare contingency measures and provide stimulus packages to support packaging companies during this stage.

step 3

the final stage, it would be on the rebound. In this post-pandemic scenario, the demand for packaging is expected to witness a gradual increase. The reopening of restaurants, cafes, hotels and other food service outlets would boost demand for packaging. However, recovery in other sectors would be slower, as consumers are expected to show low spending behaviour and restrict purchases of luxury or high-priced items. The speed of recovery for packaging companies will differ greatly by particular segments, depending on the degree of disruption among the segment’s customers and the challenge to the supply chain activities of various companies.

Overall, the food and beverage industry was hard hit by the COVID-19 pandemic. In many places, panic buying situations arose, resulting in food shortages. The supply chain was disrupted due to the blockade imposed on countries and the limited availability of labour, which impacted the supply of ingredients and raw materials.

Food demand in many emerging countries is more closely linked to income. Loss of income opportunities could result in under-consumption

The lack of tourism has also affected the food and beverage industry. For example, Spain’s economy depends heavily on tourism. As the COVID-19 pandemic progressed, the tourism industry came to a halt, which, in turn, affected the food and beverage industry’s revenues. The sudden shift has changed people’s shopping pattern, resulting in less traffic in restaurants and an increase in e-commerce deliveries.

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We are currently in Stage 2 of the pandemic scenario. Increasing reliability in e-commerce deliveries, in addition to gradual lifting of blockades and normalization of the economy in a post-COVID scenario or a Stage 3 situation, is expected to drive the F&B metal cans market over the next 1-2 years. In the future, measures such as safe and sustainable packaging, responsibly sourced raw materials, sustainable manufacturing practices, electronic grocery options and home delivery, automated solutions and tools, and digitization are expected to further drive the food and beverage industry, thereby boosting packaging requirements.

 

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