New partnership could boost Brazils can recycling

RIO DE JANEIRO - Brazil could soon start recycling plastic soft drinks bottles and steel beverage cans when a partnership between the countrys leading canmaker and a Norwegian recycling specialist gets properly underway. A letter of intent signed this week between Latas de Aluminio (Latasa) and Norways Tomra could pioneer the recycling of the packaging used for most of Brazils huge fizzy drinks market, said Latasas president Jose Carlos Martins. "The entry into Brazil of an international recycling specialist indicates recycling is becoming big business here. The new company being set up could double in size within two years," Martins said. "Growth in can recycling goes hand in hand with growth in Brazils can market, which is up strongly by 12.6 percent this year...including both aluminium and steel beverage cans." Martins added that the upturn in demand was a result of Brazils overall economic recovery, which had taken time to filter through to the final consumers spending patterns. There were good opportunities for recycling plastic drinks bottles - the packaging used for more than 70 percent of the fizzy soft drinks consumed in Brazil - and also in steel cans despite their lower unit value compared with aluminium cans. Latasa signed up with Oslo-based Tomra, a Norwegian bottle and can recycling machine maker, to form a new company which groups Latasas growing assets in aluminium can recycling. Tomra is to invest $28 million for a 70 percent share in the new company, whose name has yet to be announced. It is expected to be operational from January 2001 and generate revenues in the range of $40 million for next year. Latasa, Latin America largest can manufacturer, will retain a 30 percent share in the venture, which will oversee its current operations in Brazil, Chile and Argentina. It is 40 percent owned by Brazils biggest private bank Bradesco , 35 percent by the worlds largest aluminium producer Alcoa Inc and 13 percent by investment bank JP Morgan. The remaining stake is split. Martins said Latasa decided five months ago to seek a strategic partner for its recycling business. "This is because our recycling business was growing so fast we thought it might overtake our core business of making cans, which was not our intention," he said. Tomra is now undertaking a period of due diligence at Latasa which should be completed by the end of the year. It runs recycling operations in various materials in Europe, the United States and Asia. Latasas assets to be grouped together in the joint venture include its aluminium can collection and recycling operations throughout Brazil, its recycling centers in Argentina and Chile and its remelting centre at Pindamonhangaba, Sao Paulo state. This has an annual production capacity of 40,000 tonnes of high-grade aluminium ingot, used in can body sheet production. This remelting centre is currently producing 34,000 tonnes a year of aluminium, Martins said. This is processed by the local unit of Canadas Alcan Aluminium at a nearby aluminium smelter into can body sheet which is sent back to Latasa for canmaking. Around 40 percent of the raw material used at Latasa for aluminium can production originates from recycled aluminium, the Latasa president said. "There is clear potential to boost this percentage further, with tremendous cost savings to be achieved," he said, adding that remelting aluminium involves considerably lower energy costs than primary production. Some 75 percent of the aluminium cans produced in Brazil are now recycled - one of the highest levels of efficiency in the world - and again there is a potential to rise further. The countrys aluminium can makers are now running close to their full production capacity of 12 billion cans per year. Latasa claims to have 50 percent of the Brazilian market, the remainder being shared between Latapack-Ball Embalagens, American National Can do Brasil and Crown Cork Embalagens. REUTERS NEWS SERVICE