The nonferrous metals sector has entered the current year facing significant volatility, a direct and turbulent continuation of market dynamics established throughout 2025. At the heart of this disruption are the Section 232 tariffs imposed by the U.S. government, a policy measure that has profoundly reshaped pricing structures, demand patterns, and fundamental trade flows for both copper and aluminum. The ripple effects of these tariffs have created a complex and often contradictory market environment. For copper, this has manifested as a stark divergence between domestic and international valuations, creating unprecedented arbitrage opportunities and redirecting material away from U.S. shores. Meanwhile, the aluminum market is grappling with its own set of distortions, where a surge in premiums for prime metal stands in sharp contrast to a struggling and oversupplied scrap sector. For businesses across the supply chain, from scrap processors to end-use manufacturers, navigating this new landscape has become a critical challenge defined by supply uncertainty and dramatic price swings that defy historical norms.
The Copper Conundrum: A Tale of Two Markets
Domestic Demand Versus Global Appetite
The tariffs enacted in August 2025 triggered what industry observers have called “seismic moves” in copper’s valuation by creating a massive, albeit temporary, arbitrage between the U.S. Comex and the London Metal Exchange (LME). This spread, which typically hovers around seven cents per pound, ballooned to an astonishing one dollar per pound at its peak, fundamentally altering trade incentives. As the market has settled into 2026, a key trend solidifying this new reality is the growing chasm between soft domestic demand and exceptionally strong global demand for high-quality copper scrap. This has resulted in a significant and persistent price spread, where U.S. consumers are consistently offered prices 15 to 20 cents per pound lower than what international buyers, particularly in industrial powerhouses like India, Japan, and South Korea, are willing to pay for the same material. In response to these powerful economic signals, U.S. scrap processors are now channeling unprecedented volumes of their best-grade material directly into the export market, bypassing domestic consumers in pursuit of higher returns.
The Looming Supply Squeeze
This strategic pivot toward more lucrative export sales is setting the stage for a potential supply squeeze within the domestic market. According to one industry executive, many U.S. consumers have become accustomed to a perceived market glut and have been slow to adjust their procurement strategies, continuing to offer lower prices under the assumption that material will remain readily available. However, this perspective fails to account for the new global dynamics at play. Processors, facing higher profits abroad, have little incentive to hold inventory and wait for domestic orders that may never match international bids. The prediction is that domestic consumers will soon face a stark reality as they discover the surplus they relied upon has been shipped overseas. While currently high prices are encouraging a decent flow of scrap material from collection points, this supply chain remains vulnerable. The onset of winter weather, a perennial factor in the scrap industry, looms as a potential disruption that could further tighten the availability of material and exacerbate the looming domestic shortfall.
Aluminum’s Uneven Impact: From Premiums to Scrap Piles
Skyrocketing Premiums and Prime Material
The U.S. aluminum market has been similarly distorted, though in different ways, by a formidable 50% Section 232 tariff on imports introduced in June 2025. The most immediate and dramatic consequence of this policy was its effect on the Midwest premium, a key benchmark for the cost of delivering aluminum. To offset the steep tariff and create a viable incentive to attract prime aluminum into the country, the premium skyrocketed from its typical 40-cent range to nearly one dollar by January 2026. This necessary adjustment has directly translated into a steady and significant increase in the overall price for prime, or new, aluminum, impacting costs for manufacturers across numerous sectors. The tariff effectively walled off a portion of the global supply, forcing the domestic market to pay a steep price to secure the primary metal essential for industrial production and fundamentally resetting the cost basis for all virgin aluminum consumed within the United States.
The Scrap Market’s Struggle
In stark contrast to the booming prices in the prime aluminum sector, the scrap aluminum market has failed to realize any parallel gains and is instead facing a period of stagnation and oversupply. Primary aluminum scrap, the material generated from manufacturing processes, is currently struggling with a glut, while the prices for secondary aluminum, produced from recycled end-of-life products, have remained stubbornly flat. This has created a precarious situation for scrap processors, who are hesitant to lock themselves into long-term supply contracts amid such price uncertainty and weak demand signals. Compounding these fundamental market issues were significant production disruptions that occurred in 2025, most notably a major fire at a Novelis facility. This incident severely impacted the nation’s capacity to consume recycled aluminum, further contributing to the oversupply of scrap and deepening the disconnect between the high-flying prime market and the beleaguered secondary materials sector.
Navigating a Transformed Landscape
The tariff-driven market shifts of the past year have created a new and complex reality for participants in the U.S. metals industry. The pronounced arbitrage in copper and the bifurcated performance of the aluminum market were not temporary fluctuations but rather indicators of a fundamental restructuring of trade and valuation. Domestic consumers, who had long operated with the assumption of supply security, were forced to confront a globalized scrap market where their purchasing power was directly challenged by more aggressive international bids. For scrap processors, the environment demanded a strategic realignment, pushing them to develop more sophisticated export channels and reevaluate their domestic commitments. These developments underscored that the market’s core dynamics had been reconfigured, moving beyond short-term volatility to establish a new operational standard that prioritizes global price signals over historical, localized relationships.
