By US aluminium tariffs threaten to trigger a critical shortage of aluminium scrap in Europe, jeopardising secondary production.
European Aluminium had also cautioned that increased US tariffs on aluminum might trigger a scarcity of aluminum scrap in Europe, a crucial element for secondary production.
This potential shortfall arises because scrap, being less affected by tariffs, is driving a change in US demand.
Consequently, the association reports an alarming surge in EU aluminum scrap exports to the US in recent months.
“The trend is likely to intensify due to the recent tariff increase,” Thu Lan Nguyen, head of FX and commodity research at Commerzbank AG, said in a note.
This poses a problem for the domestic recycling industry, which has already been confronted with rising scrap exports in recent years.
To preserve resources, the EU is exploring methods to enhance secondary production and foster a circular economy.
Increased exports are seen as a result of both low domestic demand and unfair trade practices.
This situation could lead to “scrap leakage,” meaning other nations might limit their own scrap exports or subsidise their recycling sectors, providing them an unjust advantage and enabling them to offer higher prices.
In reaction to recent events, the probability of the EU implementing stricter limitations on scrap metal exports is now much higher.
This increased likelihood is expected to add further pressure on European aluminium premiums, Nguyen said.
Copper market
Elevated US tariffs on both aluminum and steel are influencing more than just those materials, and specifically affecting the copper market as well.
Increased US tariff likelihood on copper is anticipated to drive further COMEX inventory growth.
“After all, the US government is now likely to focus more on sectoral tariffs due to the recent ruling by a US court declaring reciprocal US tariffs illegal,” Nguyen added.
The increase in aluminium and steel tariffs could at least point in this direction.
Sustained anxieties about a copper ore deficit, potentially hindering global metal output, are likely to keep copper prices buoyant.
Copper price forecast
Commerzbank’s copper price forecast for the next two quarters has been raised to $9,500 per ton, from previous forecasts of $9,200 and $9,400 due to the impact of tariffs.
“We continue to expect a decline in prices, albeit only a slight one,” Nguyen said.
The increase in US demand is expected to be short-lived and could potentially decline in the future.
Once tariffs are introduced or stocks are sufficiently replenished, US imports are likely to fall again and US demand will then stabilise at a lower level.
A US aluminium industry association has voiced strong criticism of the steep tariffs, arguing they risk significantly reducing demand. Such a reduction, they contend, would ultimately harm US aluminium manufacturers.
It reinforces the German bank’s assessment that the tariffs will ultimately have a dampening effect on prices.
“We also remain sceptical about fears of a raw material shortage, especially if Chinese copper ore imports remain at a high level, and therefore see potential for a setback in the copper price,” Nguyen noted.
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