Overview of Global Aluminum Can Industry

GLOBAL PACKAGING INDUSTRY
The global packaging industry encompasses a wide range of material types across paper and cardboard, plastics, metals, glasses, wood and other materials. According to the CRI Report, the global packaging industry has exhibited an overall growth with the consumption of packaging materials having increased from US$533.2 billion in 2008 to US$590.6 billion in 2012. This represented a CAGR of approximately 2.6%. The consumption of packaging materials is, to a large extent, dependent on the global economic activities. In 2008/2009, we experienced the global financial crisis, which led to a slight decrease of 1.6% in the global consumption of packaging materials

Global Consumption of Packaging Materials from 2008 to 2012

Metal Packaging
Materials used in metal packaging include mainly iron and steel, and aluminum. According to the CRI Report, metal packaging accounted for approximately 16% of the global packaging market during the period from 2008-2012. Metal packaging offers excellent tightness and opacity, which prevents light oxidation and contamination of the contents. Such property of good content protection enables metal packaging to extend the quality guarantee period and shelf life of packaged content. Furthermore, raw materials used in metal packaging can usually be recycled, which is favorable to the fast-moving consumer goods market.

Breakdown of Global Packaging Industry by Material Types in 2012

Global aluminum can market
According to the CRI Report, the global sales revenue of aluminum cans has enjoyed a moderate growth from US$24.3 billion in 2008 to US$29.6 billion in 2012. This represented a CAGR of approximately 5.1%. Mainly driven by the beverage industry and the economic growth in emerging
markets such as China, Brazil and Indonesia, the global aluminum can market is estimated to continue its upward trend during the period from 2013 to 2017, growing from approximately US$31.7 billion to US$41.7 billion and at a CAGR of approximately 7.1%, according to the CRI Report.

Global Sales Revenue of Aluminum Cans from 2008 to 2017 (in US$)

Due to their light weight and anti-corrosion nature, aluminum cans are widely used in packaging beverages, industrial and household products, personal care and cosmetic products and other consumer items. In terms of quantity, beverage packaging accounts for over 90% the total units sold each year, mostly in the form of cans with zip-top lids. Industrial and household products like paints, air fresheners and insecticides or personal care and cosmetic products such as body deodorants, hair spray and some pharmaceutical items are generally packaged in aluminum aerosol and non-aerosol cans.

Global Sales of Aluminum Cans by End Products from 2008 to 2017 (in cans)

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Global aerosol can market
Aerosols are usually packaged in aluminum cans or tinplate cans. The cost of a tinplate aerosol can is normally around 60% cheaper than the cost of an aluminum aerosol can with the same dimension. However, aluminum aerosol cans are characterized by their pressure tolerance and relatively high
flexibility which provides them with capability of being manufactured in sophisticated and easy-to-grip shapes. They are also generally perceived to be more pleasing by consumers compared to tinplate aerosol cans. These characteristics contribute to the core competitiveness of aluminum aerosol cans, as well as the increasing proportion of aluminum aerosol cans in the total output of aerosol cans.
Global Sales Revenue of Aluminum Aerosol Cans from 2008 to 2017

According to the CRI report, aluminum aerosol cans accounted for approximately 48.1% of all aerosol cans used in packaging in 2012 and the global aluminum aerosol can market is forecast to grow at a CAGR of approximately 6.8% for the period from 2013 to 2017, from approximately US$1.5 billion to US$2 billion, primarily due to the growth of consumption of aerosol products per capita in the emerging markets such as China, Brazil and Indonesia as well as the growing preference for aluminum over other metal materials being used for aerosol packaging.

OVERVIEW OF THE PRC ECONOMY
According to the World Bank Group, China was the second largest economy in the world by GDP in 2011. According to the statistics published by the National Bureau of Statistics of China, the GDP of China increased from RMB31,405 billion to RMB59,132 billion from 2008 to 2012, representing a
CAGR of approximately 17.1%.

GDP Growth of the PRC Economy from 2008 to 2012

Signs of re-acceleration of the PRC’s economic growth emerged close to the end of 2012. Growth momentum in the PRC economy is expected to pick up and the GDP growth is forecast to rise by 8.2% in 2013 as compared to that in 2012 according to the International Monetary Fund. According to the CRI Report, the PRC’s GDP growth will demonstrate modest changes around 8.4% for the period from 2013
to 2017.
With the sustained economic growth over the period from 2008 to 2012, the PRC’s urban household disposable income per capita increased from approximately RMB15,781 to RMB24,565, representing a CAGR of approximately 11.7%. The annual per capita consumption expenditure in urban
areas in the PRC also achieved a CAGR of approximately 10.9% from RMB11,243 in 2008 to RMB16,978 in 2012.

Urban Household Disposable Income Per Capita and Annual Per Capita Consumption Expenditure in Urban Areas in the PRC from 2008 to 2012

The increasing urban household disposable income in recent years has led to the substantial growth of China’s consumer market. In addition, as mentioned in the National 12th Five-Year Plan, the Chinese government will continue to maintain sustainable economic growth through the stimulation of domestic consumption. With the upward trend in consumer purchasing power, the PRC’s total retail sales of consumer goods rose from RMB10,849 billion in 2008 to RMB21,031 billion in 2012, which represented a CAGR of approximately 18%. During the same period, sales revenue of personal care and cosmetic products also recorded a CAGR of approximately 16.2% in the PRC.
It is forecast that a rising domestic consumption will bring about an increase in spending on various consumer goods including personal care and cosmetic products, which will lead to growing demands for packaging products such as aluminum aerosol cans in terms of quantity and quality.

Total Retail Sales of Consumer Goods in the PRC from 2008 to 2012

Sales Revenue of Personal Care and Cosmetic Products in the PRC from 2008 to 2012

THE PRC METAL PACKAGING MARKET
According to the CRI Report, the sales revenue of the PRC metal packaging industry increased from RMB54 billion in 2008 to RMB76.2 billion in 2012 at a CAGR of approximately 9%.

i) Sales Revenue and ii) Market Share of Major Materials used in the PRC Metal Packaging Industry from 2008 to 2012

Iron and steel, and aluminum are currently the primary metal packaging materials in China, with iron and steel having dominated the market mainly due to their lower costs. The CRI Report states that the sales revenue for packaging products using aluminum in the PRC rose from RMB14 billion in 2008 to RMB24.5 billion in 2012 representing a CAGR of approximately 15%, whereas that packaging products using iron and steel in the PRC grew from RMB37.9 billion in 2008 to RMB48.6 billion in 2012 representing a CAGR of approximately 6.4%.
When compared with the developed countries such as the United States and Japan, there is strong market potential in the metal packaging industry in China. The sales revenue generated by the metal packaging industry in China is projected to maintain its growth momentum in the foreseeable future. For instance, in the United States which accounted for the largest share of the global metal packaging industry in 2012, the total metal packaging consumption was approximately US$25.5 billion in 2012.

According to the CRI Report, annual metal packaging consumption per capita in the United States in 2012 was approximately US$81, while annual metal packaging consumption per capita in China for the same year was equivalent to approximately US$9.

THE PRC ALUMINUM CAN MANUFACTURING MARKET
In recent years, aluminum has been widely used in the metal packaging market in the PRC. Its product series include beverage cans (such as two-piece aluminum beverage cans), aerosol cans (such as medicine cans, insecticide cans, personal care and cosmetic product cans, and industrial and
household product cans), food cans (such as milk powder cans and common food cans), chemical cans and mixed cans (such as cans used for packaging stationery, toys and gifts). The following table reveals the share of each of the major product categories (actual and forecast) in the PRC aluminum can market in terms of production volume during the period from 2008 to 2017. It is expected the market share of aluminum aerosol cans will continue to increase in the overall aluminum can manufacturing market in the coming years.
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China also exports certain portion of its production of aluminum cans to other countries or the consumer brand manufacturers export the aerosol products after they are bottled in the PRC. The demand for aluminum cans manufactured in the PRC is therefore both affected by the consumption
patterns and spending power of the domestic market as well as the demand from overseas markets. The CRI Report points out that direct export of aluminum aerosol cans generally accounts for 20% to 30% of the entire total production volume in the PRC, whereas less than 2% of total production volume of aluminum beverage cans in the PRC are exported to overseas markets.

Production Volume of Aluminum Aerosol Cans in the PRC from 2008 to 2017

As seen from the chart above, the production volume of aluminum aerosol cans grew at a CAGR of approximately 19.1% from 2008 to 2012 and is forecast to grow at a CAGR of approximately 12% from 2013 to 2017, according to the CRI Report. We believe the continuous growth in spending power and the increasing demand for high quality packaging for consumer products in the PRC market, as well as the gradual pick up of the global economy will be the driving force for the future expansion of the aluminum aerosol can manufacturing industry in the PRC.

OVERVIEW OF THE UAE ECONOMY
According to the World Bank Group, the UAE was the 28th largest economy in the world by GDP in 2011. The GDP of the UAE increased from approximately US$314.8 billion to approximately US$386.4 billion from 2008 to 2012, demonstrating a CAGR of approximately 5.3%. The global
financial crisis in 2008/2009 was a serious blow for the UAE, which experienced a drop of approximately 14% in its GDP growth in 2009.

GDP Growth of the UAE’s Economy from 2008 to 2012

Under the influence of the global financial crisis in 2008, the UAE’s urban household disposable income per household fell by approximately 3.7% in 2009 and a slow pick-up was noted since 2010.

Urban Household Disposable Income Per Household in the UAE from 2008 to 2012

For the period from 2008 to 2012, the UAE’s total retail sales of consumer goods grew from US$138 billion in 2008 to US$236 billion in 2012 at a CAGR of approximately 14.3%, whilst the sales revenue of personal care and cosmetic products increased from US$3.2 billion in 2008 to US$4 billion
in 2012, representing in CAGR of approximately 6.2%.

Total Retail Sales of Consumer Goods in the UAE from 2008 to 2012

Sales Revenue of Personal Care and Cosmetic Products in the UAE from 2008 to 2012

Given the advantage of the low tax rate, prices of personal care and cosmetic products sold in the UAE are more competitive when compared to those sold in other neighbouring countries and this attracts many tourists to Dubai, the UAE. Given an increase in the consumption of overseas tourists
coupled with the rising annual urban household disposable income, it is anticipated that there will be a rise in the market size of personal care and cosmetic products in the UAE in the near future, thereby drawing up the demands for aluminum aerosol cans for packaging such products.