Novelis, the world’s largest producer of aluminium beverage can sheet, is seeing a drop in shipments as the world emerges out of the pandemic.
Novelis reported total shipments of 908 kilotonnes (Kt) in the quarter ended December 2022, about 2 percent lower from 930 kt in the same period a year ago, and down 8 percent sequentially. The December quarter shipments were the lowest since the record high hit in Q2FY21, which was in the middle of the pandemic.
As Novelis gets 58 percent of its volumes from beverage cans, the drop reflects the shift in beverage consumption pattern globally post the pandemic.
Hindalco Industries, the parent company of Novelis, said destocking by can customers impacted Novelis shipments.
Satish Pai, managing director at Hindalco, in a post-earning media call, said the destocking is a result of high inventory held by can customers, who were hoping for the high demand for canned beverages to continue at the pandemic levels. “The at-home consumption has shifted as more people are drinking outdoors,” he said.
Significant destocking
The sector saw destocking when it went through a structural shift following a decline in home consumption demand after people resumed offices post Covid lockdowns, especially in Asian countries, analysts with Motilal Oswal noted in a report on Novelis earlier this month.
Destocking by customers has been a global trend for Novelis, which reported lower beverage packing and specialties shipments in Europe. It said volumes were down in Asia due to lower beverage packaging shipments by North America customers. The company in its earnings call said destocking in North America alone cost it 60 Kt of shipments in the December 2022 quarter. For South America, the company said beverage packaging shipments were high on increased capacity but demand was muted due to destocking by customers. The destocking is expected to continue for a couple of more quarters.
At-home consumption falls
As the at-home consumption boom ends for can demand, Novelis is now pinning hope on pre-pandemic factors to drive demand.
A year ago, Novelis’ near-term outlook for the beverage packing segment was robust on high at-home consumption and package mix shift driven by a preference for sustainable beverage packaging options. According to the company’s latest market view, demand fundamentals remain intact on the back of general consumption, product innovation and preference for sustainable packing.
Hindalco expects demand to return to pre-pandemic growth levels of 3 percent to 4 percent per annum, said Pai, who, for now, sees the destocking spilling over to the first quarter of the next financial year.
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