The question of aluminum and substitution

Some key substitution scenarios

Aluminum beverage can sheet versus PET: Debate started about beverage companies converting back to PET when the Section 232 tariffs first went up to 25% in early 2025. To be clear, beer is not in this discussion as it has its own substitution options between aluminum and glass. PET resins are around $0.64 per pound compared to aluminum can body which are around $2.75-$2.80 per pound. A layperson might be tempted to question why there isn’t more switching to PET, but we have not seen this swap.

Ball Corporation, the leading aluminum can maker, reported Q3’25 earnings growth of 3.44% and volume increases of “mid-single digits.” We suspect, like many end-users of aluminum, that beverage fillers have been marking time on the decision to switch from aluminum in hopes that something would change on the Section 232 tariff structure.

Other contributing reasons for staying the course with aluminum could be include:

• Established infrastructure: The beverage industry has finely tuned filling lines that are set up for aluminum.
• Consumer preference: PET has a relatively weak recycling performance, recovering only 30.4% of its bottles in 2024, according to the NAPCOR 2024 PET Recycling Report. The younger generation prefers more sustainable packaging and aluminum remains a superior choice, even though its own recycling rate still languishes around 46%. Consumers identify aluminum as having more potential to be recovered.
• Product protection: Aluminum cans do a better job of dealing with mechanical stress and temperature fluctuations during transportation and storage. PET bottles have struggled with porosity issues.

Aluminum automotive sheet versus steel automotive: The recent fires that shut down a part of Novelis’ rolling mill in Oswego, N.Y. have raised concerns about aluminum sheet supply to the auto sector. In its Q3’25 earnings report, Ford Motor Co. said the shortage in aluminum and production disruptions from the Oswego fire on Sept. 16 would cost Ford $1.5 billion to $2 billion for the year.

The parties seem to be working through the short-term supply challenges, however costly. However, the larger threat is now coming from cost. With Midwest aluminum prices approaching $2.34 plus conversion costs, aluminum auto sheet is now about five times the cost of steel automotive sheet based on what we have been able to learn about conversion pricing.

It’s difficult to put a specific number on the base price of steel automotive sheet. Much like aluminum automotive sheet, companies are guarded about revealing their pricing. Some of this is a product of “most favored nation” clauses in their sales contracts where buyers have the right to demand the seller meet any lower offer they find in the market.

In October, steelmaker Cleveland Cliffs said it had completed defect-free pilot work on exposed steel (high-quality, visible-surface steel) using existing aluminum forming equipment, enabling a switch from aluminum to steel without retooling. If commercialized, this could be a big deal given re-tooling is a major capital expense in making any material substitution.

In talks with leading automotive analysts, the threat of steel substitution against aluminum comes when an OEM is at the end of a model campaign. An OEM will not make major switches in the middle of a production campaign because it will not have fully amortized the tooling on the existing materials. Some interior parts can be swapped out mid-cycle, but bodywork is another story.

A major contributing cost to the process of switching materials is also the need to go to the National Highway Traffic Safety Administration (NHTSA) to re-certify their vehicles.

The threat of steel taking share back from aluminum is a threat. Even prior to the Oswego fire, OEMs were concerned with the cost of aluminum. Much like the beverage fillers, a wait and see attitude on Section 232 has not proven to be of value. Now, hard decisions will have to be as model campaigns come to an end.

Aluminum versus copper: It is not all bad times when it comes to substitution. The red metal is on a tear and now trades at 4x aluminum. That ratio is starting to arouse the attention of even the most conservative engineers who love copper. Let’s be clear, aluminum household wiring is not coming to hardware stores in the near future. Historical experience with poorly designed bi-metallic junctions connecting aluminum wire with copper outlets led to many fires. There is a stigma in the US against aluminum building wire, and most building codes restrict it for light voltage application.

Where aluminum is making market share gains is in medium voltage distribution where 8000 series aluminum alloys are approved. Aluminum already owns 100% of high voltage transmission, so don’t count on any gains there.

Copper is also at risk in magnet wire applications. China has historically led the way in testing the boundaries of aluminum vis-à-vis coper in small winding wire, converting many small motors for white goods to aluminum. This is only natural given the fact that China remains a huge net importer of copper and is self-sufficient in aluminum.

HVAC is another market under threat for copper. Some of the high-end OEMs say they are sticking with copper for its performance and durability versus aluminum. We suspect that the more price sensitive “commodity” OEM are going to testing the limits of aluminum against copper.

Why this matters

There is a tendency to look at prices and say, “Time to switch.” OEM engineers don’t think like traders, and they are ultra-conservative. However, the price differentials between aluminum and PET, steel, and copper have blown out long enough that the holdouts are starting to do the math.