US Aluminium Tariffs Threaten Scrap Clash with European Union

SEATTLE (Scrap Monster): U.S. President Donald Trump's move to double tariffs on aluminium imports heightens the risk of a full-blown scrap war with the European Union.

Although they are supposed to be blanket tariffs with no exceptions or exemptions, there is one significant gap in the tariff wall.

 Aluminium scrap is explicitly excluded on the grounds it constitutes a key raw material for U.S. manufacturers.

The Trump administration's decision to lift aluminium tariffs to 25% effective the start of March has already caused U.S. imports of recyclable material to rise.

 This week's doubling of the tariff rate to 50% could turn the import flow into a flood.

The European Union, which is mulling export duties on aluminium recyclables to stop what it terms "scrap leakage", is coming under pressure to move sooner rather than later.

US PREMIUM SURGES AGAIN

The U.S. Midwest aluminium premium has rocketed to a record $1,325 per metric ton after Wednesday's doubling-down on import tariffs.

That's the price U.S. buyers will pay over and above the international price traded on the London Metal Exchange (LME), currently $2,430 per ton for cash metal.

What once reflected the cost of transport to get metal to the U.S. Midwest manufacturing hub is now a tariff premium, capturing the fracture of the global aluminium pricing structure.

U.S. consumers of aluminium goods will ultimately foot the bill but mid-stream processors are likely to do well.

Fabricators converting raw metal to semi-finished goods such as can sheet were the prime beneficiaries of the first Trump administration's 10% tariffs, according to a report by consultancy Harbor Aluminum commissioned by the Beer Institute.

Mid-stream processors passed on the tariff, even if the raw material was domestically sourced scrap, Harbor found.

The new tariffs will incentivise fabricators not only to maximise their domestic purchases of scrap but to tap overseas markets, where U.S. buyers can now outbid just about anyone else for available material.

SCRAP WARS

U.S. imports of aluminium recyclable materials jumped to over 80,000 tons in March, the highest monthly volume since 2022.

There were sharp increases in supply from Canada and Mexico, the two largest and nearest suppliers to the U.S. market.

However, the tariff differential has started to draw material out of Europe, according to the European Aluminium association.

Exports from EU countries to the United States spiked in the first quarter of the year, it said.

They are only going to accelerate as the transatlantic price gap widens after this week's doubling of tariffs.

The EU is facing a "full-blown scrap crisis", according to the association. Director General Paul Voss called on the European Commission to immediately impose a corresponding duty on scrap exports to the United States.

The Commission has already identified high aluminium scrap exports as a key hurdle in its ambition to meet the bloc's "Circular Economy" targets.

A March "Action Plan", opens new tab for both the aluminium and steel sectors promised a decision by the third quarter of this year on suitable trade measures, including reciprocal export tariffs on countries "that apply unfair subsidies" to their recycling industries.

Courtesy: www.reuters.com