Cheers China! Beer Can Switch to Boost Aluminum, Rio Tinto Says

(Bloomberg) -- A switch by China’s packaging firms to favor aluminum cans for beer and soft drinks is among key drivers that’ll underpin continued demand growth for the lightweight metal, according to Rio Tinto Group.

The world’s second-biggest miner, which generates more than a quarter of its revenue from the metal, also sees demand being boosted by the forecast rise of electric vehicles and the push by manufacturers to produce lighter cars to reduce emissions, Rio’s aluminum unit Chief Executive Officer Alf Barrios said Monday in an interview.

“In the packaging sector, especially around soft drinks and beer in China, we’re seeing a shift from glass to aluminum,” he said.

Chinese beer makers, including Tsingtao Brewery Co., rose on Monday after both UBS Group AG and Goldman Sachs Group Inc. issued reports saying they expected industry-wide price hikes. UBS estimates 28 percent annual profit growth for the sector from 2018 to 2020 as demand recovers.

Cheers China! Beer Can Switch to Boost Aluminum, Rio Tinto Says

London-based Rio forecasts aluminum demand to rise about 4 percent a year for the next five years, and is yet to factor in the likely additional benefits that’ll flow from the adoption of electric vehicles, which typically use more of the metal than conventional vehicles, Barrios said.

Global consumption of refined aluminum is likely to have annual growth of 3 percent to 4 percent in 2018 and 2019, while China’s curbs to supply will act “as a long-term game changer,” spurring price gains to incentivize the addition of new capacity elsewhere, according to Citigroup Inc.

Supply cuts under anti-pollution efforts and industry reform in China means “the rest of the world, where demand is also growing, will have to supply itself with aluminum in future,” Barrios said in the interview. “Until now, the thinking was that China would be a net exporter, and all that growth would come from China, that’s where the change is, that view is now different.”

©2017 Bloomberg L.P.