Arconic fields customer interest as it returns to North American aluminum can sheet market

Pittsburgh — US industrial company Arconic is receiving inquiries for aluminum can sheet orders as it prepares to re-enter the market for the packaging product in North America following the recent expiration of a non-compete agreement, company CEO Timothy Myers said Nov. 5.

The non-compete agreement was put in place upon Arconic's split from Alcoa in 2016. At the time, Alcoa retained its can sheet business while Arconic adopted the company's remaining downstream rolling business.

"Our non-compete in packaging just ended on Saturday [Oct. 31], so we've had lots of expression of interest in that segment from current customers, former customers and customers we've never heard from," Myers said during a call with industry analysts.

Myers said Arconic had idle packaging capacity across its North American operations that can be brought back online with minimal capital expenditure, but it will take time to reach significant can sheet production in the region as a qualification period will be involved to arrange commercial commitments and ramp up volume.

"We would not expect to see meaningful revenue contribution from new packaging production until the second half of next year or later," Myers said.

Arconic's can sheet output will not necessarily be disruptive to the market since its capacity will not be overwhelming relative to total North American volume for the product, and the company will carefully look for beneficial sales opportunities, Myers added.

"I think the market is going to welcome us back, but certainly, we've worked very hard to improve the margin profile of this business, and that market is growing," he said. "We're going to make sure that we find the right opportunities."

The Pittsburgh-based company reported a $5 million profit on sales of $1.4 billion in the third quarter. Though sales dropped 22% year on year, the company's net income rose from a $24 million loss in Q3 2019.

New Tennessee capacity ramping up in Q4

Myers said some of Arconic's can sheet volume may be provided through capacity expansions at the company's Alcoa, Tennessee, rolling mill, which will be ramping up during the current quarter.

The company originally announced in 2019 that it was investing about $100 million to expand its hot mill volume at the Tennessee plant by the end of 2020 to manufacture industrial and automotive aluminum products.

The expanded capacity at the Tennessee operations and the return of idle packaging capacity at other facilities are part of Arconic's previously announced plan to bring 600 million lb, or about 270,000 mt, of incremental annual capacity online across its North American rolling mill network to serve multiple end markets, Myers added.

"The profile of what we do with that 600 million lb is just going to develop based on how we secure positions and qualify products with different customers," he said. However, Arconic has not provided a timeline for the ramp-up of the incremental capacity.

Myers said the expanded volume at Tennessee will first be directed at Arconic's industrial products segment before moving into automotive and packaging products.

"Sales in the industrial market increased 11% from prior quarter and declined 3% year over year in the midst of the broader economic slowdown," Myers said. "Our sales benefited from expanding volumes at our Tennessee facility."

Myers said Arconic will also seek to secure new domestic demand freed up by the ongoing common alloy aluminum sheet trade case filed by the Aluminum Association earlier in 2020, targeting imports from 18 countries.

"Imports from these countries represented 32% of domestic demand for these products in 2019, a total of 1.4 billion lb," Myers said. "If we use the 2018 trade case against Chinese imports as a proxy, this represents an opportunity for North American manufacturers of approximately 1.1 billion lb in 2021."

Imports from the countries under investigation declined by 45% year on year through the end of August in anticipation of the trade action, the executive added.

Myers said the declining imports could primarily benefit its Tennessee plant, as well as its production facilities in Davenport, Iowa, and Lancaster, Pennsylvania.