INTERVIEW: Primary aluminum supply crunch boosts scrap demand, prices

The primary aluminum supply deficit and double-digit price spikes over the last two months -- driven largely by the Middle East war -- are triggering increased substitution with scrap, boosting global demand for it, even as the conflict simultaneously restricts access to this alternative input.

For the EU, without policy intervention, this could result in higher scrap exports and decreased imports, potentially leading to a decline in capacity utilization among recyclers, René Djibril, director industry and market intelligence at European Aluminium, told Platts, part of S&P Global Energy.

The Persian Gulf accounts for 6% of global primary aluminum output, but its share of ex-China supply exceeds 20%, according to Djibril. In 2025, the region supplied 19%, or 1.2 million metric tons, of the EU's externally sourced ingots, while the US procured 20% of its ingot imports from the region.

Scrap demand

Due to the conflict temporarily disrupting supply, European Aluminium expects a significant deficit in the primary aluminum market, with this year's shortfall anticipated to range between 1 million and 2 million mt.

Countries vulnerable to disruptions in primary aluminum supply, including Turkey and Japan, are expected to increasingly rely on scrap, according to Djibril. Competition for scrap is already heating up, and Europe is particularly affected due to its openness and considerable role in the international scrap trade, he said.

Platts assessed European aluminum automotive shredded scrap at Eur2,300/mt on May 6; the assessment has risen Eur500/mt, or 28%, since the beginning of 2026.

"While some degree of price fluctuation can be explained by normal market dynamics or seasonality, what we are seeing now goes beyond that; the speed and scale of recent increases are being driven by structural factors," Djibril said. Disrupted primary aluminum production is one aspect, but scrap availability has also been impacted.

In 2025, the Gulf Cooperation Council accounted for 20%, or 415,700 mt, of India's 2 million mt aluminum scrap imports, data from S&P Global Market Intelligence's Global Trade Analytics Suite show.

According to Djibril, if Indian producers are unable to secure those volumes from the GCC, they will turn to regions with abundant and unprotected scrap supplies, such as the EU. This is while the EU itself is at risk of losing its 40,000 mt/y scrap imports from the GCC.

Pre-existing issues

Djibril cautioned that the Middle East conflict is not acting in isolation. By the end of 2025, a quarter of European producers had already faced curtailment of recycling capacity, and in previous years, several recycling plants -- in Germany, the Netherlands and Italy -- were either closed or went bankrupt.

The global aluminum scrap market has already been distorted for some time by industrial subsidies in China, trade policies that incentivize scrap imports, and lower environmental and social costs in third countries, according to Djibril.

The US's 50% tariffs on ingots led to a 30% increase in the country's aluminum scrap imports last year, a trend that has continued into the current year, he said.

Meanwhile, China has shifted its focus to secondary aluminum production, with domestic recycling capacity expanding rapidly -- even though utilization rates at existing plants remain low, at 30%-40%. "In normal market economies, such strong growth in production capacity would not be economically viable," Djibril said.

Supply flow

The EU exported 1.3 million mt of aluminum scrap in 2025, according to Djibril. Due to these significant outflows, the EU also had to import the raw material, bringing in 652,000 mt that year.

"The upward pressure on scrap prices is a global phenomenon, but Europe is particularly exposed to it, because it is both a large producer and exporter of scrap. And when demand rises, a greater share of European scrap can be drawn toward higher-paying markets, tightening domestic availability and amplifying price pressures," Djibril said.

Although recycling is considered more competitive than primary aluminum production, it is not experiencing a straightforward "boost" because its cost base is highly sensitive to scrap prices, he said.

Nevertheless, the association expects that secondary aluminum will continue to play a crucial role in Europe's supply mix and that its relative share will increase if global primary aluminum production remains constrained.

To support the domestic industry, scrap export restrictions are in the works. In November 2025, the European Commission said it was developing a measure to address aluminum scrap leakage, with a decision expected by the end of the second quarter of 2026.

Expansion scope

The current crisis, together with wider supply chain pressures and restrictions on Russian metal, reinforces the strategic case for growing Europe's domestic source of aluminum through recycling in addition to the primary base, Djibril said.

He did not specify the exact additional capacity required, as this depends on highly uncertain factors such as changes in global trade flows and fluctuations in energy costs. However, several new plants are already under construction.

Based on projects announced for the 2024-28 period, Europe's recycling capacity could increase by 1 million mt, according to European Aluminium.

In 2025, EU recycled production totaled 4.4 million mt, compared with 1.2 million mt for primary output. This year's tonnage will depend on whether European producers can secure sufficient scrap and manage elevated costs, including those for energy, Djibril said.

European aluminum recycling furnaces mostly rely on natural gas. European gas prices have risen 25%-30% since early March, reaching Eur40-45/MWh by mid-April, European Aluminium noted.

Capacity is not the immediate constraint for smelters, nor is capability; the European recycling industry can process all types of scrap, including composite materials such as Zorba, Djibril said.