Rexam to add new can plant in Denmark

By Ahmed ElAmin

- Last updated on GMT

Related tags: Denmark, Rexam

Rexam said yesterday it would build a new beverage can plant in
Denmark to meet increasing demand in Europe.

The £78m (€112m) new plant, expected to have a capacity of 1.2bn cans in the 33cl and 50cl sizes, will provide another source of supply in a tight market. The aluminium beverage can plant will be built in Fredericia, the first of its kind in Denmark. Rexam expects the plant to be operational during the first half of 2009 to meet the upturn in demand. "Due to this strong growth, the European beverage can industry overall is running at very high utilisation rates,"​ the company stated. The new plant will supply beverage cans to the Northern European market. The European beverage can market, excluding Germany, has grown annually by 8 per cent over the past few years and is anticipated to continue to grow at a similar rate over the next three. The demand is being fuelled by strong growth in the Nordic region, Rexam stated. In September Wachovia Capital Markets forecast that announced capacity additions to beverage can production in Europe would likely not be enough to meet rising the demand. The analysis of the European market forecasts a continuing squeeze on the supply of beverage cans and possible further price increases in Europe. Wachovia noted that European beverage can manufacturing capacity is being increased by 16 per cent through 2009. The market is dominated Ball Corp., Crown Holdings and Rexam, who have what the analyst describes as a global "oligopoly" on beverage can manufacturing. Wachovia makes the case that the announced capacity additions will likely be soaked up by even very conservative demand assumptions. The "oligopoly" also gives the three companies leverage to recover higher input costs from processors. The result is that operating margins in Europe for beverage can manufacturers can be 300 to 500 basis points higher than in the US, the analysts said. Rexam holds a 40 per cent share of the European market, Bell a 23 per cent slice, and Crown another 20 per cent. Europe's beverage can market experienced a growth rate of about 10 per cent in 2006, with volumes showing the same rise year-over-year during the first quarter of 2007. US consumption is 101bn cans for 300 million people, while Europe consumes 45bn cans for 400 million people. Due to the increasing demand several of the major can-makers are adding capacity in Europe between 2007 and 2008. Capacity in the region is expected to increase by 16 per cent, or by 7.3bn cans. About 2bn in can capacity came on online this summer, with Ball bringing its Hassloch, Germany plant back on-line, in addition to a new production being added to the Hermsdorf, Germany facility. Meanwhile Rexam is building new plants in Chelyabinsk, Russia and Nuziders, Austria. The plant in Russia is expected to increase capacity by 800m cans. Rexam initially announced it was building a two line can plant for Red Bull in Austria expansion, and has recently added a third line, with capacity from the plant expected to total roughly 1.8bn cans.

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