INTERVIEW: EU aluminum smelters being priced out of home scrap market: trade body

The European Commission will this month announce a decision as to whether or not it will take action to slow the outflow of aluminum scrap from the EU. Trade association European Aluminium is hopeful that the measures that will ensue will solve many smelters' problems over access to affordable scrap, Director General Paul Voss told Platts, part of S&P Global Energy, in an interview.

European scrap buyers find themselves in an emergency, according to Voss, as issues such as overcapacity, subsidies and differences in labor standards, among others, draw European scrap from higher to lower production cost regions such as Asia.

On top of that, the US has hiked its Section 232 tariffs on aluminum to 50%, while subjecting scrap imports to a lower 15% tax. This 35% arbitrage empowers US smelters to win bids for the raw material and traders to take advantage of the market distortion, according to Voss.

"The European scrap buyer is left in an impossible situation: in some cases, the cost of the scrap exceeds the price of its final product," he said.

There are two likely ways the European Commission will approach it -- either through a quota system, whereby scrap can continue to leave Europe, but only up to a certain level, or through an export duty that will add an extra cost to export deals, so that the domestic buyer can compete more effectively, Voss said.

20%-30% EU tariff needed

European Aluminium believes the EU needs tariffs in the range of 20%-30%, saying that suggestions from independent analysts and consultants have come up with similar ranges.

"The tariffs should not be put in place and left there forever: if the roots of the problems, like overcapacity, tariff distortions, are addressed, I can imagine a time when the measure is not needed anymore," said Voss.

The EU consumes about 8 million mt of aluminum scrap annually, with its recycled aluminum production at about 5 million mt/year. It exported some 1.2 million mt in 2024, almost doubling over a decade from just over 757,000 mt shipped out in 2014.

Asian countries, mostly India, are the main destinations for European scrap. Flows to the US are still minor, but are growing at "impressive" rates: from January to June 2025, they jumped threefold year over year, according to European Aluminium.

Importers grow recycling

The EU also imports aluminum scrap, but Voss believes the same phenomenon inflating prices in Europe will drive them up around the world. "There will be increasing interest in scrap everywhere for circular economy, decarbonization and energy efficiency reasons, so there won't be some other places where we can go and buy cheap scrap," he said.

The Middle East, one of the main sources of the EU's scrap imports, is investing in new recycling capacity: Emirates Global Aluminium (EGA) is building in the UAE a 170,000-mt/year scrap-fed smelter.

"That, for sure, will attract all the scrap, which is now sent to Europe," Voss said, adding that he wants to avoid a situation where the EU continues to grow its exports while imported scrap is becoming less available.

Production to restore incrementally

With the EU a net importer of aluminum, European Aluminium also wants local producers to have priority access to domestic scrap, so that the bloc can produce more of its own metal and import less of it.

"The European Union lost 50% of its domestic primary aluminum production in the last two years as a result of the energy crisis. It is only now starting to recover," Director Industry & Market Intelligence at European Aluminium, Djibril René, told Platts during the same interview.

"In 2021, we were producing 2 million mt/year [of aluminum from primary raw materials] in the EU. Now, we are producing around 1 million mt," he said. The association's forecast suggests that production will increase slightly, but is unlikely to return to the 2 million mt/year this or next year, because the construction and automotive industries are not performing well.

Voss, however, stressed that the pending scrap export policy changes are not intended to address wider problems in the economy: "They are not a way of compensating for the automotive and building sectors being slow. Scrap leakage is a problem in itself and needs to be solved regardless of how well the overall market is doing."

Tariffs vs quotas

Turning to the possibility of the EC applying quotas, Voss said he was not "deeply philosophically opposed to it," but he thought it would be a much harder solution to design and use, and he did not see an upside to it.

One big problem with the quota is that figuring out what its exact volume should be and what types of scrap it should apply to is very complicated. Also, the quota is much easier to circumvent by shifting scrap around between categories, according to Voss, who does not expect similar, or other, downsides from tariffs.

They should not jeopardize scrap collection, for example, because demand domestically and outside the EU is there, as smelters are increasingly looking for recycling inputs to mitigate their costs, added René.

"Someone will stop making quite so much money exploiting the arbitrage ... that's not going to stop us from sleeping at night," said Voss. "My WhatsApp is full with messages from CEOs of our companies saying 'I cannot buy scrap in Europe.' I've rarely seen my industry more united and more troubled as it is now."