Dual challenges for aluminium market highlight need for more auto scrap intel

The US aluminium market has faced dual challenges this year of increased costs because of tariffs and a major outage at a rolling mill that supplies most of the automotive-grade sheet to automakers.

These problems have highlighted the need for more specific pricing references for high-quality aluminium scrap grades, a key feedstock for aluminium mills, as well as an oft-undervalued revenue source for scrap generators. Argus has launched five new US automotive aluminium scrap assessments to shed light on the market as it contends with widening spreads, higher overall prices and squeezed availability.

These new prices will serve scrap suppliers, secondary producers and tier one original equipment manufacturers, who have recently signalled problems in efficiently tracking prices for several of these key automotive aluminium scrap grades on the back of supply chain and policy changes.

Dealers and processors typically trade mill-grade aluminium scrap at a discount to the Midwest transaction price (MWTP) — the product of adding the assessed P1020 Midwest premium to the daily London Metal Exchange settlement.

Those discounts reflect the domestic balance of supply and demand for scrap and the outright changes in the MWTP, leaving the market for scrap aluminium heavily linked to the primary market, which has hit record highs in 2025 because of US tariffs.

Tariffs

Domestic secondary aluminium alloy producers supply a range of 5XXX-, 6XXX- and 7XXX-series alloys to the automotive markets, depending on the application. These alloys contain several non-aluminium base and minor metals, mainly copper, magnesium and silicon. But since the Trump administration first applied and then further raised Section 232 tariffs on aluminium imports this year, the market has remained almost exclusively concerned with cost and supply of primary aluminium.

The US is heavily reliant on imports of primary aluminium, namely P1020, which has been subject to a 50pc import tariff since June. The effect on costs for automotive producers has been multi-faceted.

For one, secondary aluminium alloy producers consume primary aluminium to make alloys. The US imported approximately 1.06mn metric tonnes of primary aluminium in the first half of 2025, according to customs data, compared with just 335,000t domestically produced in the same period, according to US Geological Survey data.

Argus assessed premiums — for the now tariffed P1020 — at an average of 84¢/lb as of 22 October, up from just 19.5¢/lb a year earlier. Alloy producers as a result have sought to reduce exposure to primary aluminium by upping scrap consumption, but those efforts have been constrained by pricing dynamics.

Still, scrap spreads have remained relatively tight to the MWTP — a function of higher alloy and raw material prices, and few alternatives.

Demand for and supply of those alloys was further complicated following a fire that curbed production at aluminium roller Novelis’ Oswego plant in New York — a key supplier of automotive aluminium sheet — in September. Given the plant’s capacity, the market has struggled to quickly and seamlessly find alternative alloy supplies, forcing automakers to adjust production.

Ford [announced plans on 23 October to shift production of its flagship F-150 towards hybrid and Super Duty variants](Ford boosts trucks on demand, Novelis fire | Latest Market News) and away from its electric vehicle (EV) Lightning version, which is more aluminium intensive.

Automotive growth

This price increase and likely temporary supply shock only expedited a growing but previously opaque segment of the secondary aluminium market.

Automotive producers have for years increased the share of aluminium in vehicles to reduce weight and provide additional options for corrosion-resistant parts and components.

The average automobile contained 205kg (452lbs) of aluminium in 2022, up from 151kg in 2016 and was forecast to rise to 256kg by 2030, according to a 2022 outlook from Ducker Carlisle.

Although undergoing somewhat of a slowdown, EVs are expected to contribute disproportionately to this trend over the coming years. Nonetheless, traditional internal combustion engine vehicles have also relied more on aluminium in recent years, including in body and chassis parts, as well as wheels.

Aluminium castings accounted for 60pc of the 2022 aluminium content figure, Ducker’s data show, followed distantly by sheet with a share of 22pc.

US automakers have not eschewed this trend and as such the wider aluminium market will likely have to continue negotiating with these market dynamics for the coming years.