European scrap policies narrow secondary aluminium discount, LME Insight says

By Romel S. Gurky

European efforts to retain more aluminium scrap within the region are beginning to narrow the long-standing price discount of secondary aluminium relative to primary metal, according to an analysis by LME Insight.

The report said Europe, which exported more than 1.2 million tonnes of aluminium scrap in 2024, is moving to treat scrap as a strategic domestic resource through new measures under the European Commission's RESourceEU Action Plan. The policy shift is expected to reduce exports and increase the availability of scrap for European recyclers.

As a result, competition among domestic remelters for scrap previously shipped to China and Southeast Asia has intensified, pushing up prices for high-quality scrap and narrowing discounts on secondary aluminium.

LME Insight said rising electricity costs and carbon pricing are further improving the competitiveness of recycled aluminium. Secondary aluminium requires less than 1 MWh of electricity per tonne compared with roughly 14 to 15 MWh for primary production, while the European Union's Carbon Border Adjustment Mechanism (CBAM) is increasing the cost of carbon-intensive imports.

The analysis noted that clean, specification-grade scrap is increasingly being viewed as a substitute for primary aluminium, particularly as demand for low-carbon materials grows.

However, LME Insight cautioned that the discount between secondary and primary aluminium is unlikely to disappear completely because most post-consumer scrap contains impurities such as iron, copper and silicon that limit its use in higher-value wrought aluminium products.

According to the report, the strongest price gains are expected in clean and traceable scrap streams, including beverage can scrap, automotive sheet offcuts and extrusion scrap, which can be recycled into high-grade products without compromising quality.

While export restrictions, carbon costs and growing demand for recycled materials are reshaping Europe's aluminium market, LME Insight said metallurgy remains the key factor limiting how closely secondary aluminium prices can converge with primary metal.

Editing by Alexander Ginting