1 Policy shift: From price tools to access tools
On September 4th, the European Commission announced a change in the policy path for imposing a 15% export tariff on recycled aluminum. The reason given was that the proposed tool could only cover about half of the export volume. According to relevant reports, the EU has abandoned the imposition of an export tariff on aluminum scrap, mainly considering the negotiations of the free trade agreement with India. India is the EU's largest buyer of recycled aluminum. The European Commission has shifted to the WSR framework. This regulation, targeting the main export rules for non-OECD countries, will come into effect on May 21, 2027, and in principle, prohibits the export of related non-hazardous waste to non-OECD destinations that have not obtained the corresponding authorization.
The draft list released on September 18th involved 32 applicant countries and regions. However, the authorization for metal scrap exports is proposed to be given only to a few destinations such as Moldova, Montenegro, Serbia, Ukraine, and North Macedonia, and is limited to specific waste categories. India, Thailand, Malaysia, Indonesia, and other major Asian buyers have not obtained the corresponding authorization. The consultation on draft opinions ended on October 16th. The release date and scope of the official list and whether they will be adjusted remain to be confirmed in subsequent documents.
This shift means that the EU's constraints on recycled aluminum exports have shifted from "price" to "qualification". Tariffs are a cost constraint. As long as buyers are willing to include them in their quotations, the trade flow can still continue. The price of European recycled aluminum has risen significantly in the past year, reflecting the strong affordability of overseas buyers. Access restrictions are a qualification constraint. Destinations not on the list cannot obtain the corresponding supply even if the quotations are higher.
However, the new framework still has two boundaries. The first is the OECD boundary. Turkey, Japan, South Korea, the United States, Mexico, etc. apply to another set of export management rules, and the transit channels still exist, but they also need to meet environmental protection and facility review requirements. The second is the legal definition of waste. Aluminum scrap that meets the "terminating waste" standard of EU Regulation 333/2011 is no longer considered waste in law and is theoretically not subject to this rule. Whether the European Commission will set additional restrictions on such materials in the future will directly affect the strength of the ban.
In addition, the two sets of identification standards cannot be mixed. The qualified recycled raw materials recognized by China may not be recognized as "terminating waste" by the EU; destinations included in the list do not mean that all metal scrap will be released, and specific waste codes and receiving facilities must be compared. In terms of time arrangement, the first list should be established by November 21, 2026, and then it needs to be reviewed by the European Parliament and the Council. The release date of the list is not equivalent to the start date of the ban.
2 EU's waste aluminum outflow: Volume, structure and pricing imbalance
In recent years, the volume of EU waste aluminum exports outside the region has remained high. In 2024, the export volume was approximately 1.26 million tons, an increase of about 50% compared to 2019, and further increased to 1.27 million tons in 2025, reaching a historical high. According to the International Sustainability Standards Board (ISSB), in the period from January to May 2026, EU waste aluminum exports outside the region were 567,000 tons, an increase of 3.8% compared to the same period in 2025. The exports to India were 170,300 tons, to Thailand 68,900 tons, and to the mainland of China 59,000 tons, accounting for 52.6% of the total export volume. India and Thailand, etc., did not obtain the EU's authorization for metal scrap exports, meaning that the new regulations do not cover the marginal areas of EU waste aluminum exports, but rather the main Asian procurement chain.
The driving force of the outflow is more directly reflected in the price. From October 2025 to June 2026, the European recycled aluminum price rose from approximately 1,500 euros per ton to 2,240 euros per ton, while the price of primary aluminum rose from approximately 2,700 euros per ton to 3,150 euros per ton. The discount of recycled aluminum relative to primary aluminum has significantly narrowed.
The root cause of the narrowing discount lies in the uneven development of the recycling industry across different regions. Chinese electrolytic aluminum enterprises are constrained by a "ceiling" of 45 million tons of production capacity, while Indian recycling aluminum capacity is expanding rapidly. Both have anchored their payment willingness for scrap aluminum to the local price of primary aluminum and its scarcity. Meanwhile, European recycling aluminum enterprises are constrained by high energy costs, and their bidding capacity is limited. The European aluminum industry's characterization of the outflow of scrap aluminum as "raw material leakage" serves as the logical starting point for the EU to take action to restrict the export of scrap aluminum.
There is no unified stance within Europe on this matter. Smelting enterprises hope to keep the scrap materials within the region to increase production utilization; recycling and sorting enterprises are concerned that export restrictions will depress recycling profits. The underlying divergence is grade mismatch: the grades of scrap materials in short supply in Europe may not be the ones with the largest export volume, and restricting exports will not automatically replenish the sorting equipment and matching orders. How much scrap materials can be retained within the region depends on the digestion capacity of the processing system.
If the local scrap material price is lower than the costs of collection, dismantling, and sorting, the upstream processing volume will decrease, and the reduced imports will not all be converted into new supply in Europe. The short-term impact is a reduction in raw material discounts, and the long-term recovery volume may shrink.
3 China's "Exposure": Beyond direct flow, more attention should be paid to the transshipment chain
The import volume of aluminum scrap waste in China was 201.6 million tons in 2025. Since 2026, imports have weakened ahead of schedule, with a cumulative import volume of 12.43 million tons from January to August, a year-on-year decrease of approximately 7.5%. The expected EU export restrictions, the phased export restrictions on scrap aluminum by the UAE, and the inversion of the internal and external price difference have combined to slow down this year's import pace. It is not appropriate to attribute the weakening of scrap aluminum imports entirely to the new EU regulations. Traders usually do not wait until the rules are implemented before adjusting strategies; policy expectations will already have an impact on procurement and shipment in advance.
From the source structure perspective, the proportion of direct imports of scrap aluminum from the EU in China has steadily increased, reaching 16.7% in 2024, 17.3% in 2025, and 19.4% in the first quarter of 2026. However, this proportion alone may underestimate China's true "exposure". In recent years, after Malaysia tightened its policy on scrap metal imports, Thailand quickly became a hub for pre-processing and re-export of scrap aluminum. In 2025, Thailand exported approximately 471,000 tons of scrap aluminum to China, an increase of nearly 60%, accounting for about 23.4% of China's imports. Thailand's domestic scrap aluminum production is limited, and its export capacity is largely based on importing raw materials from Europe and the United States, processing them, pressing them into blocks, and then reselling them to China.
This time, both Thailand and Malaysia were not granted EU metal scrap waste export authorization, which means that the chain of pre-processing of EU scrap aluminum through Southeast Asia and its entry into China may be simultaneously constrained by the direct purchasing chain. Therefore, China is facing the reorganization of the entire supply chain from "EU - Southeast Asia - China", with EU scrap aluminum being just one part of it.
From the domestic supply perspective, imported scrap aluminum is an important supplement, and the EU's export restrictions on scrap aluminum do not yet constitute a raw material crisis. The real impact is in the structure: pressed blocks of profiles, 3rd/5th/6th grade edge and corner materials, etc., mainly flow to recycling aluminum and deformed aluminum enterprises, with high compatibility in the formula, and can be recycled and utilized at the same grade. The imported materials also include casting, deformation, and pure aluminum categories, which cannot be calculated as high-quality processed aluminum. Although the domestic old scrap aluminum recycling system is expanding, the sorting and purification capacity of mixed old materials is insufficient, and it will be difficult to make up for the specific grade gap in the short term.
The migration of import sources has already been reflected in the data. From 2024 to 2025, China's imports of scrap aluminum from Thailand increased from 298,000 tons to 471,000 tons, while imports from Malaysia decreased from 211,000 tons to 68,000 tons. The combined total increased from 509,000 tons to 539,000 tons. The overall supply from Southeast Asia did not decrease; instead, the shipping ports shifted from Malaysia to Thailand.
In the short term, it is difficult for domestic materials to fully replace imported ones. Most of the new scrap materials in the processing stage have been recycled in the factories or returned by customers, and do not enter the open market; the used materials from automobiles, buildings, and household appliances are subject to the product usage cycle, and the price increase is unlikely to generate a significant increase. Therefore, for regions with a large demand for imported materials, the supply of available and compatible raw materials that can be circulated in the short term is the key variable, which can better explain the spot premium compared to the total production of scrap aluminum in the country.
4 Historical Mirror: "Scramble for Transportation - Cliff - Circumvention" in 2019
Scrap aluminum trade has not experienced this kind of policy shock for the first time. Since July 1, 2019, scrap aluminum waste was included in the restricted import category. Before the policy was implemented, importers concentrated on transporting, and after the policy was implemented, the quota was tightened. The import volume was 1.383 million tons in 2019 and dropped to 823,000 tons in 2020, a significant reduction compared to 1.558 million tons in 2018. Since November 2020, enterprises that meet national standards have no longer been managed as solid waste, and related enterprises have moved the pre-treatment process to Malaysia and Thailand. The import volume rebounded to 151.5 million tons in 2022 and exceeded 20 million tons in 2025.
This history provides the following lessons: First, before the policy is implemented, there is often concentrated transportation; second, after the policy is implemented, there is a traffic trough; third, the trade flow will be rerouted through changing routes and forms, but the extent and cycle of repair are uncertain. Based on this, from the clear final list to the applicable period of the new regulations in May 21, 2027, there is a possibility that the EU will have pre-shipment for scrap aluminum exports to China and Southeast Asia. After the new regulations are applied, attention should be paid to the risks of slower replenishment and supply connection problems.
There are two possible circumvention paths: one is to conduct sorting or pre-treatment in the destination that complies with the rules; the other is to shift from scrap aluminum trade to the trade of recycled aluminum ingots, that is, melting into qualified products in regions such as the EU or other regions with conditions and exporting them. This requires meeting the product attributes and the requirements of both ends of the trade rules, and changing the customs declaration name alone cannot achieve it. If the second path is feasible, the processing and melting profit will shift to the overseas, and domestic enterprises' external raw materials will also enter in the form of ingots rather than scrap.
5 Price Transmission: Narrowing of the Price Gap between Premium and Scrap, Regional Pricing Differentiation
How the price of aluminum products evolves depends on who fills the gap. In the short term, the price of high-quality mature aluminum in China lacks elasticity. Once the import supply shrinks, recycling aluminum enterprises will have three options: raising prices to compete for domestic mature aluminum, increasing the input of primary aluminum, or reducing the operating rate.
The triggering condition for primary aluminum input is that the comprehensive cost per ton of qualified products is lower than scrap aluminum. The first layer of transmission thus forms: the price of some scrap aluminum approaches that of primary aluminum, and the price gap between premium and scrap aluminum is compressed.
The second layer of transmission points to domestic primary aluminum. The substitution of primary aluminum for scrap aluminum means that the demand shifts from the recycling system to the primary system, and the expansion of electrolytic aluminum production capacity is limited. Even if the transfer volume is not large, it will fall on the supply curve with extremely low elasticity, providing marginal support for aluminum sheet prices. The EU's restrictions on scrap aluminum exports will eventually be reflected in the growth of China's primary aluminum demand, with the strength depending on the operating rate of recycling enterprises, the ratio of raw materials, and the supplementation of imported alloy ingots.
The third layer of transmission is reflected in the price difference of futures varieties. Casting aluminum alloy uses recycled materials as the cost anchor, and the tightening of raw materials will raise its cost curve. Under other unchanged conditions, the price gap between casting aluminum alloy and primary aluminum has the potential for an upward movement.
The situation in Europe is the opposite. In the short term, the domestic production capacity and sorting capabilities are unable to handle the originally exported waste aluminum. The remaining products will face pressure, and there is room for the price ratio between waste aluminum and primary aluminum to fall. The ratio of waste aluminum to primary aluminum will decrease as the raw material costs of some enterprises drop. However, whether the low-priced waste materials can be transformed into new qualified products depends on factors such as energy, equipment and orders. This cannot be used as evidence to infer that the demand for primary aluminum in Europe has decreased by the same amount. From a global perspective, waste aluminum has not disappeared; it has merely changed its flow direction. In the short term, the effective supply that can enter the production process has decreased. Regional pricing may show differentiation: some raw material supplies in China are tight, while some grades of waste aluminum in Europe are loose. The trend of the internal and external price ratio needs to be verified by combining exchange rates, inventories and import windows.
In summary, this round of changes in the EU's export policy has transformed the nature of waste aluminum: from a freely circulating bulk trade commodity to a resource that requires qualification to be exported. For China, the overall impact is limited. The pressure is concentrated on specific grades such as refined and mature aluminum with low impurities and the transshipment chain of "EU - Southeast Asia - China", with the transmission path being the narrowing of the price difference between refined and waste aluminum, the marginal increase in the demand for primary aluminum, and the upward movement of the price difference between cast aluminum alloy and primary aluminum.
