Japanese, US makers pour it on in Southeast Asia

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Producers of aluminum cans, as well as the sheet they are made from, are expanding Southeast Asian output capacity in anticipation of sharp growth in beverage-packaging demand.

UACJ, the biggest aluminum-rolling company in Japan, will spend more than 10 billion yen ($88.4 million) to expand a Thai sheet production plant by 70% in two to three years. Full-blown output began at this Rayong Province site last fall.

The company has already spent 55 billion on the plant, whose annual capacity now reaches 180,000 tons. It will install more rolling equipment and set up finishing lines in a 150,000-sq.-meter open space to bring capacity to 300,000 tons — on a par with UACJ’s biggest Japanese plant, a facility in Fukui Prefecture. UACJ was born from the 2013 merger of Furukawa-Sky and Sumitomo Light Metal Industries.

Those who can

UACJ sees the Southeast Asian and Australian markets for aluminum cans expanding 40% from current levels to a combined 26 billion cans in 2020. “We will ride a wave of growth,” said Takayoshi Nakano, a senior managing executive officer.

Just as beverages in aluminum cans quickly gained popularity in Japan following their 1971 introduction amid a fast-growing economy, demand for the lightweight, corrosion-resistant containers is seen growing sharply in Southeast Asia.

“I stock up on cans of soda because my two elementary-school-aged daughters love cola and other sodas,” a homemaker in Hanoi said.

Companies that make aluminum cans using sheet from UACJ are also expanding capacity. Ball, the world’s leading can manufacturer, is seen opening its first Myanmar plant to produce aluminum beverage cans in the first half. Fellow American company Crown Holdings is strengthening Thai and Vietnamese facilities opened in 2013.

Japan’s Showa Denko plans to lift capacity at a plant near Hanoi by about 50% to 2 billion cans a year by 2018, spending some 6 billion yen via a Vietnamese unit.

Vietnam consumes about 23 liters of carbonated beverages per person per year, according to online media giant Zing. While this comes in below the global average of 40, the market has expanded some 70% over the past five years.

Low-priced canned beer is also gaining traction. In Thailand, cans selling for the rough equivalent of about 100 yen — about 10% cheaper than such major brands as Singha — are increasingly popular among workers.

As retail chains modernize in Southeast Asia, beverages are increasingly available in aluminum cans rather than glass bottles and other containers. Although plastic bottle demand is also on the rise, aluminum can demand is growing sharply for beer because it must be protected from sunlight and kept from going flat.

Keeping their edge

China, which accounts for half of the world’s aluminum metal output, has been ground zero for sinking materials prices. The country’s economic slowdown and excessive equipment investment by its manufacturers have led to a glut in aluminum, just as it has with steel. Japanese and U.S. companies, which have a competitive edge over Chinese rivals in processing technology, are rushing to ramp up production in Southeast Asia. They are fully aware that the Chinese will likely go on the offensive in the region sooner or later, touting low prices.

Aluminum can production involves rolling and twisting sheet 0.2mm thick, and foreign objects can punch holes during this process. Companies including UACJ, having met Japanese customers’ demand for quality, are skilled at eliminating impurities in the melting process. They have accumulated know-how in rolling processes and temperature management to control metal crystallization to fit specific applications and have kept the techniques in-house rather than risk disclosure by filing for patents.