As resource security and decarbonization become increasingly important, major economies are strengthening efforts to retain aluminum scrap. From the EU's review of export controls and the U.S. strategic asset proposal to Japan's circular economy initiatives and policies in the UAE and South Africa, these developments could reshape global scrap flows and affect secondary aluminum markets.

According to the OECD's latest Steel Outlook 2026, global excess steel production capacity is projected to reach 745 million tonnes by 2028 — surpassing total OECD steel output by 319 million tonnes. Planned new capacity additions of 139 million tonnes between 2025 and 2028 represent a 5.7% increase, while demand is forecast to grow at only around 0.9% annually, widening the supply-demand gap. Most new capacity is being built outside OECD countries, frequently with government support — in 2024, Chinese steelmakers received subsidies equivalent to 15 times more relative to total assets than producers elsewhere. OECD member capacity contracted overall, with the UK seeing the sharpest decline at 39.7% between 2021 and 2025, followed by Japan at 7.2%. Export restrictions on scrap metal across 42 countries and rising energy costs linked to Middle East tensions are further weighing on investment and the low-carbon transition.

Aluminum associations from the United States, Europe, Canada and Japan highlighted OECD data showing that global aluminum-sector subsidies totaled USD118.3 billion during 2005-2024, with China accounting for USD101.4 billion, or 86% of the total. In 2024 alone, China received USD10.2 billion of the sector’s USD11.1 billion global subsidies. Industry groups noted that China’s share of global primary aluminum output has risen from 11% to 61% over the past two decades, with subsidy-supported growth extending into downstream processing and recycling. The associations called for coordinated measures, including import monitoring systems, tariff alignment and potential scrap export restrictions, to strengthen supply-chain security and support fair competition.

The global copper scrap market is entering a period of structural tightening as geopolitical tensions and industrial policy increasingly reshape trade flows. The relationship between the United States and China sits at the center of this transition, particularly as Washington considers restricting exports of high-quality copper scrap in 2027 while China remains heavily dependent on imported secondary copper feedstock. China’s copper scrap imports remained strong in 2024 at 441,080 MT, underscoring continued demand from secondary refiners serving the EV, renewable energy, power grid, and manufacturing sectors. However, imports have collapsed in 2025 to 143,271 MT, with current projections for 2026 falling further to just 5,305 MT. The sharp decline signals a rapid deterioration in China’s direct access to imported scrap feedstock amid rising geopolitical friction and tariffs. China’s existing 10% tariff on US-origin scrap has already reduced the competitiveness of direct shipments, although clean high-grade material has continued to move because of favorable processing economics. Trade flows indicate that copper scrap is increasingly being rerouted through Southeast Asia rather than moving directly from the United States into China. US copper scrap exports to ASEAN rose from 170,687 tonnes in 2024 to 222,993 tonnes in 2025, while Chinese imports of copper scrap from ASEAN increased from 434,176 tonnes to 529,345 tonnes over the same period. The correlation strongly suggests ASEAN is emerging as a critical intermediary hub for scrap aggregation, processing, blending, and re-export into China. This shift reflects a broader restructuring of the global scrap trade as market participants adapt to tariffs, geopolitical risk, and the growing probability of tighter controls on high-quality US scrap exports. Countries such as Malaysia, Thailand, and Vietnam are increasingly functioning as alternative routing channels within the global secondary copper supply chain. The timing is significant because the United States continues to export around 1 million tonnes of copper scrap globally in 2025 while domestic secondary refinery production remains limited at approximately 50kt. This imbalance is becoming central to the policy debate in Washington. As US demand for copper accelerates through grid modernization, electrification, AI-driven data center expansion, and defense manufacturing, policymakers are increasingly questioning whether high-grade recyclable copper should continue flowing overseas while the US remains dependent on imported refined copper. Current policy discussions focus on retaining a larger share of premium copper scrap within the domestic market beginning as early as 2027. Although proposals currently stop short of a full export ban, any retention mechanism would still materially reduce export availability for high-quality grades such as bare bright copper and No.1 copper scrap. For China, tighter access to premium scrap has important implications beyond the secondary market. High-quality scrap directly competes with refined copper cathode because it offers high recovery rates with lower processing intensity than primary smelting. If imported scrap availability continues to tighten, Chinese refiners will likely need to increase refined copper purchases to maintain output levels. This dynamic could become increasingly supportive for refined copper markets globally. The primary copper market is already facing structural constraints from weak mine supply growth, declining ore grades, permitting delays, and years of underinvestment in new projects. A simultaneous tightening in high-grade scrap availability would amplify pressure on refined copper balances precisely as demand linked to electrification continues to strengthen. As a result, the market could see narrower scrap discounts relative to cathode, firmer copper premiums in Asia, and increased volatility across both COMEX and LME pricing. The secondary copper market is therefore becoming an increasingly important variable in the broader refined copper outlook. Ultimately, the copper scrap market is no longer operating purely on economic arbitrage. Strategic resource security is becoming a defining driver of trade flows and policy decisions. The rapid growth in ASEAN intermediary trade, combined with collapsing direct Chinese scrap imports and growing US policy intervention, signals that the global copper supply chain is entering a new phase of fragmentation — one that is likely to tighten both scrap and refined copper markets into 2026 and beyond. Author: Shairaz Ahmed, Principal Market Analyst For more information or to discuss market dynamics, you can contact me on shairazahmed@smm.cn

The US is advancing a $450M gallium supply chain project centered on the Gramercy alumina refinery in Louisiana, which is expected to host the country’s first large-scale gallium production circuit. The project involves Atlantic Alumina and includes about $150M in Pentagon funding. As the US currently has no domestic gallium production, the Gramercy refinery has become a critical asset, though its alumina operations rely entirely on imported Jamaican bauxite. China currently controls around 98% to 99% of global low-purity gallium supply, and following export restrictions, the US is accelerating efforts to build domestic critical mineral supply chains. However, the current US gallium and rare earth supply chain remains highly dependent on a single refinery and Jamaican bauxite supply.

On May 20, 2026, Indonesian President Prabowo Subianto announced during a plenary session of the National Congress that the government has officially signed a groundbreaking regulation targeting the governance of natural resource exports. This bold policy framework will establish a dedicated state-managed natural resource export agency, executing exports through State-Owned Enterprises (BUMN) acting as government-designated single exporters. According to local media disclosures and presentation slides shown during the session, this centralized mechanism will initially apply to palm oil, coal, and ferroalloys ( paduan besi ) . Under this system, direct private export transactions will be phased out, forcing overseas buyers and Indonesian producers to route contracts, logistics, and payments entirely through state-appointed BUMN nodes. 1. The Two-Phase Implementation Timeline Based on the official policy schematic diagrams disclosed on-site, the transition to a centralized BUMN-led export model will occur in two distinct regulatory phases: Phase 1 (Transition) Time : June 1, 2026 - August 31, 2026 Mechanics : Private enterprises continue to manage some internal administrative and logistics steps. However, all existing and new import-export transactions with overseas buyers must begin a step-by-step migration to BUMN entities. Phase 2 (Full Monopsony) Time : September 1, 2026, Onward Mechanics : Complete takeover. All transaction flows, sales contracts, export declarations, customs clearance, shipping arrangements, and the collection of export earnings (DHE) will be fully managed or led by designated BUMN. 2. Deep Structural Intervention: Pre- to Post-Clearance This regulatory mechanism does not simply install a government "rubber stamp." Instead, it represents a fundamental reallocation of the entire export trade chain, deeply embedding BUMN across three key logistics and financial phases: [Pre-Clearance] ──> [Clearance] ──> [Post-Clearance] (Contracts & Docs) (Customs & Loading) (Payment & FX DHE) Pre-Clearance (Contract & Goods Preparation): This covers verifying legality, IUP mining licenses, export restrictions ( Lartas ) compliance, sales contract drafting, finalizing payment terms, commercial invoicing, and vessel chartering/cabin bookings. Clearance (Customs & Physical Shipment): Includes filing export declarations (PEB), managing customs system approvals, cargo transport from smelter warehouses to port terminals, loading shipments, and issuing Bills of Lading (B/L). Post-Clearance (Documentation & Capital Flow): BUMN will act as the principal intermediary, dispatching trade documents (B/L, Commercial Invoice, Packing List, Certificate of Origin/COO) to the buyer's issuing bank and managing the repatriation of export proceeds (DHE) under strict domestic banking provisions. 3. The Billion-Dollar Question: Will NPI and FeNi be Classified as "Ferroalloys"? For the global stainless steel and electric vehicle battery supply chains, the immediate focal point is how Indonesia defines the scope of "ferroalloy" ( paduan besi ). Market consensus strongly suggests that the "ferroalloys" under discussion are highly likely targeting Nickel Pig Iron (NPI), which represents a massive trade flow of approximately 11.5 million tons of Indonesian NPI exports in 2025. However, because the official, legally binding regulation "signed" by the government has not yet been formally released to the public, further clarification is needed to verify the exact scope of affected materials. Crucially, the leaked written draft of the regulation does not actually mention "ferroalloys" at all. The term "ferroalloy" ( paduan besi ) was only verbally highlighted and presented by President Prabowo during the House of Representatives Plenary Session (Rapat Paripurna DPR) on Wednesday (20/5). According to the leaked draft text, the actual written scope of the law is structured as follows: CHAPTER II: DETERMINATION OF STRATEGIC NATURAL RESOURCE COMMODITIES Article 2 (1) Strategic Natural Resource Commodities subject to export governance include: a. coal; b. palm oil; and c. other strategic natural resource commodities. (2) The Government may amend the Strategic Natural Resource Commodities as referred to in paragraph (1) letters a and b, and establish other Strategic Natural Resource Commodities as referred to in letter c through a coordinated meeting ( rapat koordinasi ) led by: a. the minister responsible for synchronization, coordination, and control of ministerial affairs in the field of the economy ( Coordinating Minister for Economic Affairs / Menko Perekonomian ); or b. the minister responsible for synchronization, coordination, and control of ministerial affairs in the field of food ( Coordinating Minister for Food / Menko Pangan ), attended by relevant ministers/heads of non-ministerial agencies. This clause reveals a crucial legal framework: any expansion of the export control list to designate NPI, FeNi, or related ferronickel alloys under "other strategic commodities" is strictly required to be determined through a formal coordinated meeting ( rapat koordinasi ) led by either the Coordinating Minister for Economic Affairs or the Coordinating Minister for Food. Because the written regulation itself is silent on "ferroalloys," the legal scope of the policy has not been fixed yet . Until this high-level inter-ministerial coordination meeting ( rapat koordinasi ) takes place and issues a definitive annex list with matching HS codes, the practical impact on NPI trade remains pending official confirmation. Should nickel-iron intermediates formally fall under the BUMN single-exporter mandate after this meeting, SMM foresees four critical structural disruptions: I. Erosion of Direct Negotiation Flexibility Currently, Indonesian NPI is sold through a highly flexible ecosystem of steel mills, global trading desks, independent brokers, and back-to-back supply contracts. Forcing these contracts to route through a single state exporter compresses the operational room for direct price discovery, spot volume locking, and rapid high-frequency reselling. II. Absolute Export Price Transparency By funneling all sales contracts, shipping invoices, and foreign exchange collection (DHE) through state-owned channels, the Indonesian government will gain real-time, absolute transparency over actual transaction prices. This complements Indonesia's ongoing tightening of domestic mining benchmarks (HPM), the annual RKAB quota system, and the strict requirement for export proceeds to be held in domestic bank accounts. III. Disintermediation of Traders and Brokers In-transit or port-stored nickel-iron inventories have historically served as highly liquid financial assets for brokers and traders who leverage transfer orders and back-to-back contracts. Standardizing all contract entities and payment channels under BUMN will squeeze the margins of non-producing traders, rendering physical spot market quotes highly rigid. IV. Export Execution Delays Migrating long-term off-take agreements to BUMN templates will trigger significant friction during the Phase 1 transition. SMM expects delays stemming from contract re-signings, banking channel adjustments, letter of credit (L/C) re-issuances, and initial administrative coordination at port customs, temporarily disrupting short-term port-arrival schedules. 4. Market and Price Impact Analysis (If NPI were to be Involved) Short-Term Sentiment vs. Medium-Term Realities Short-Term (Sentiment-Driven): The direct impact on physical NPI shipping volumes returning to China will remain limited during the initial transition window, as private exporters continue to assist with logistics. However, given tight domestic nickel ore supplies, production cuts at several RKEF plants, and already declining NPI shipments, the market will likely digest this announcement as a fresh supply-side threat, driving up bullish sentiment. Medium-Term (Structural Shifts): If NPI is formally included in the HS code list, Chinese stainless steel mills will face centralized Indonesian state sellers. This will result in stronger payment scrutiny, fewer options for non-standard flexible transactions, and the virtual elimination of low-cost, off-market FOB deals. Transaction Costs vs. Production Costs Unlike mining-end disruptions such as rising HPM benchmarks, declining laterite ore grades, or restricted RKAB quotas, this export centralization policy does not directly raise the physical smelting cost of NPI. Instead, it functions as a tax on transaction efficiency, increasing compliance burdens, administrative delays, and state oversight on pricing. SMM concludes that the impact of this policy is an increase in "transaction-side friction" rather than raw production costs, which will ultimately support sellers' intentions to hold prices firm and reinforce the price rigidity of high-nickel pig iron. 5. SMM Outlook Indonesia’s new export regulation signals that its resource nationalism is successfully extending its reach beyond the mine gate and tax office, directly into the global sales and trading arena. However, the key takeaway is that nothing is legally set in stone for the nickel industry yet. Because the written regulation currently leaves the door open under "other strategic commodities," and the word "ferroalloy" was only delivered verbally by the President on Wednesday (20/5), the entire framework remains unfixed. The critical indicator for the nickel chain over the coming weeks is whether the upcoming inter-ministerial rapat koordinasi formally adopts the HS codes for NPI and FeNi into the final regulatory annex.