The Metal Tariff Shift: Navigating Opportunities and Risks in the Packaging Industry

The U.S. Section 232 tariffs on steel and aluminum, now at 50% for most countries and 25% for the UK, have reshaped the packaging industry's landscape. This policy-driven upheaval is accelerating a global shift toward alternative materials, creating both challenges and opportunities for investors. Companies that pivot to lightweight, cost-effective solutions or flexible supply chains are poised to thrive, while those anchored to metal-centric models face headwinds.

The Tariff Impact: Costs Rise, Supply Chains Strain

The tariff hikes have widened the price gap between U.S. and EU markets: steel prices surged by 77%, and aluminum by 139% between February and May 2025. For packaging firms, this means higher costs for tin mill steel (critical for cans) and aluminum foil. The Can Manufacturers Institute warns that canned goods could see price hikes, squeezing margins for breweries and food producers. Meanwhile, Ball Corporation (BALL), a major can manufacturer, faces a delicate balancing act—relying on imported tinplate while navigating tariff penalties.

Ball's stock has dipped 12% year-to-date as tariffs and supply chain delays weigh on its metal-dependent business. However, its diversification into recycled aluminum and lightweight can designs positions it as a potential rebound candidate if cost pressures ease.

Opportunities in Diversified Packaging Solutions

The metal crunch is driving innovation and investment in alternatives:
1. Cartons and Pouches: Companies like Amcor Limited (AMCR) and Tetra Pak (privately held, but trackable via packaging indices) are capitalizing on demand for lightweight, plastic, or paper-based packaging. Tetra Pak's aseptic cartons, used for milk and juice, avoid metal tariffs entirely.
2. Recycled Aluminum: While not tariff-free, recycled aluminum's lower cost and sustainability appeal make it a partial hedge. Alcoa (AA), with its focus on recycled content, could benefit from this trend.
3. Glass Logistics: Heavier materials like glass, though costlier to transport, are gaining favor for premium beverages. Investors should watch logistics firms like C.H. Robinson (CHRW), which specializes in bulk material shipping, as glass use rises.

Risks for Metal-Dependent Industries

Breweries and food producers face the brunt of tariff-driven inflation. Molson Coors Beverage Company (TAP), reliant on aluminum cans, has seen margins compress as input costs climb.

TAP's stock has fallen 18% since January 2025, reflecting investor concerns over its exposure to metal tariffs. Similarly, food producers using canned goods, like Campbell Soup (CPB), may struggle unless they pivot to alternative packaging or secure domestic metal suppliers.

Strategic Advantage: Flexibility and Agility

The winners in this environment will be firms with:
- Diversified Material Use: Companies like Sealed Air (SEE), which offers pouches and protective packaging, avoid metal dependency.
- Global Supply Chains: Brands with manufacturing hubs in low-tariff regions (e.g., the UK or Canada) or those investing in U.S. production (e.g., Emirates Global Aluminum's Louisiana plant) can mitigate costs.
- Vertical Integration: Firms controlling their supply chains, like Crown Holdings (CCK), may better absorb tariff impacts through scale and negotiation power.

Investment Strategy: Target Diversification and Logistics

• Buy: Amcor (AMCR) and C.H. Robinson (CHRW) for their roles in alternative materials and logistics.
• Hold with Caution: Ball (BALL) and Alcoa (AA) if tariffs ease or companies adapt quickly.
• Avoid: Pure-play metal can producers without cost-hedging strategies.

The U.S. tariffs are a catalyst for industry-wide change. Investors should prioritize agility, material neutrality, and supply chain resilience—traits that will define winners in this new era of packaging economics.

Final Note: Monitor geopolitical developments, such as the UK's tariff status post-July 9, and EU retaliation threats, which could further complicate the landscape.