Scrap Pricing Kicks up Keg Deposit Costs

Regulators in the state of Michigan are requiring beer distributors to triple the deposit-and-return charge on beer kegs in response to the widespread sale of the kegs for their scrap value.

The regulators and beer distributors hope that tripling the former $10 deposit into a $30 charge will keep kegs from being sold by legitimate customers and help ensure that buyers keep kegs secure from thieves.

According to an Associated Press report, brewers and distributors in the state have complained about thousands of stainless steel beer kegs per year in Michigan being sold off at scrap yards rather than being returned for the $10 deposit.

In response, the Michigan Liquor Control Commission will be boosting the deposit charge from $10 to $30, AP has reported.

Stainless steel scrap has skyrocketed from around 25 cents per pound late in 2005 to as much as $1.75 per pound this May. At those prices, a stainless steel keg weighing 20 pounds could fetch some $35.

For brewers the rising costs appear on the expense side of the ledger, as it can cost a beer manufacturer as much as $150 to buy a new replacement keg, according to the AP report.

Brewers are not certain the $30 deposit will be enough to alleviate the problem, and reportedly advocated an increase in the deposit payment to a whopping $90 per keg.

A spokesperson from the Michigan Liquor Control Commission termed that request “a little steep,” and expressed optimism that the $30 deposit payment would be enough to ensure the return of the keg.