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Industry suffers significant losses as manufacturing and recycling grind to a halt

Johannesburg, May 11, 2020.  Prior to the nationwide COVID-19 lockdown, started on 27 March 2020, the country’s collection and recovery rate of post-consumer metal packaging (aluminium and tinplate) was estimated at an impressive 75.8%, as reported by BMi Research. The national five week lockdown constrained the usual material recovery processes and MetPac-SA projects that this will certainly impact on the recovery rates, not only of metal packaging, but of post-consumer packaging material in general, in the 2020 manufacturing year.

MetPac-SA and its members heeded the call to financially support the waste picker livelihood and in a matter of days, over three-quarters of a million rand (R785 000) was raised collectively by the Producer Responsibility Organisations (PRO’s) and Packaging SA, in collaboration with the Department of Environment, Forestry and Fisheries (DEFF). This money was used to purchase electronic food vouchers for registered waste reclaimers.

“Although recyclable waste was still collected out of some neighbourhoods during Level 5 of the lockdown, waste management companies, scrap merchants and organisations such as Collect-a-Can were unable to process or sell the waste to recyclers. Also of great concern was the plight of informal waste pickers and reclaimers who were suddenly unable to collect materials and left without an income,” says Kishan Singh, CEO of MetPac-SA.

Assessing the impact of the lockdown

“It is still too early to calculate the exact impact of the lockdown regulations on the metal packaging industry and we expect to have a more accurate picture of how our members were and will further be affected by the lockdown regulations, during the second half of 2020,” says Kishan.

Overnight and with little warning, alcohol sales were banned in South Africa. This resulted in a dramatic drop in the amount of beer and other alcoholic beverage cans being produced and placed thousands of jobs at stake. Moreover, can makers and fillers were left with excess raw materials and finished goods that could not be moved into the supply chain. Significant losses were suffered and resulted in some of them declaring ‘force majeure’.

“Fortunately food manufacturing was listed as an “essential service” and some canned food makers were allowed to continue their operations – albeit with smaller teams and with plants running at less than 50% of their normal manufacturing output. On a positive note there was a slight increase in the demand for some products and manufacturers had to step up their production volumes as shoppers stockpiled long-life food and pantry staples,” Kishan reports.

Oversupply of aluminium cans in South Africa

The current over-supply of recyclable materials that have been stockpiled by waste management companies and scrap merchants during the 5-week quarantine period will now result in a saturation of the local market for the foreseeable future, says Kishan.

“Unfortunately lost manufacturing time cannot be regained. Local can makers will not be buying more recovered material until at least July this year and if waste collectors cannot sell their materials, they will not be able to generate much-needed cash inflow for their businesses. In addition, much of this valuable resource, now surplus in South Africa, may end up as waste in landfills”, he says.

Although the export of metal packaging was originally disallowed under Level 4 restrictions, the industry was pleased when, on 6 May 2020, the International Trade Administration Commission of South Africa (ITAC) confirmed that exports of collected aluminium cans to overseas markets would now be permissible. It is anticipated that this will help alleviate the current oversupply of recyclable materials and stimulate collection.

Looking ahead

“Despite its benefits and versatility, the local metal packaging sector is being forced to adapt to a rapidly changing business climate and an unpredictable future that is facing virtually every industry at the moment.  There is nothing that could have prepared us for this unexpected turn of events. Although we have no idea how long the lockdown restrictions will continue or what the next six months will look like, we are grateful for every small win, such as allowing employees to return to work and recyclers to resume their collections. We hope that restrictions will incrementally be lifted and that operations will soon be able to return to normal,” Kishan says.

In light of recent events, and Section 18 of the Department of Environment, Forestry Fisheries (DEFF’s) National Environmental Management: Waste Act, MetPac-SA will be reassessing its operational targets and may also need to adapt its funding and operational models. It is currently preparing a Section 18 response document to demonstrate the industry’s ongoing commitment to Extended Producer Responsibility, which will be submitted to DEFF Minister, Barbara Creecy, for consideration.

“It is clear that business has been badly disrupted and we are now preparing for the new normal. The packaging industry as a whole is likely to face dramatic changes, such as new consumption patterns, changing consumer demands and end-of-life packaging solutions. However, this should also be regarded as exciting opportunities and possibilities for metal packaging. Change is the only constant and is the law of life. If we only look to the past or present, we run the risk of missing the future!” Kishan concludes.

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