This Morning in Metals: EU Aluminum Smelting Costs Going Up, China Squeezes U.S. Scrap

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Source: Adobe Stock/Bonzodog.

This morning in metals, we look at a few key stories circulating in the metals news mill that buyers should have an eye on.

EU ETS Reform to Increase Aluminium Smelting Costs

According to CRU Group (paywall), the free carbon permit allowances for EU aluminum smelters that have always been in place are about to be reduced.

And that amounts to a cost hike.

Due to the reforms of the EU Emissions Trading Scheme (ETS) for the years 2021-2030, we can expect higher carbon prices and rising aluminum smelting costs. Buyers take note: this “will raise smelting costs for the average smelter by $10-$25/ton of aluminum, depending on the final EU policy decision,” according to CRU. “The increasing permit price will also drive indirect carbon costs higher, but the effect varies greatly from smelter to smelter,” according to the firm.

U.S. Aluminum Scrap Exporters Screwed By China?

The Wall Street Journal reports that “prices for mixed aluminum scrap dropped by about 15% over the past month, crumbling profit margins for processors and brokers that sell the material to China,” according today’s WSJ supply chain and and logistics newsletter.

“Analysts say Chinese companies may end up buying more scrap aluminum from cheaper sources in Europe. In the U.S., some worry that trash collectors may simply toss recyclables in landfills if they can’t find other buyers,” writes Jennifer Smith. Check the full story out here (paywall).

Tariffs? What Tariffs?

Meanwhile, “China’s aluminum exports hit their highest in nine months in March as strong international prices led the world’s biggest producer to sell more abroad, despite a growing trade spat with the United States,” reports Reuters.

Unwrought aluminum and aluminum product exports increased 10.2% from a year ago to 452,000 metric tons last month, according to the news service, quoting General Administration of Customs statistics.

Analysts and traders downplayed the impact of Trump’s recent import tariff since it only took effect from March 23, while the U.S.-Rusal dust-up regarding sanctions — and subsequent disruption of trade flows — could mean China’s exports have further to rise in coming months, according to Reuters.

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