COMMODITIES 2025: Mexican aluminum market expects turbulent 2025 amid tariff uncertainty

This is part of the COMMODITIES 2025 series where our reporters bring to you key themes that will drive commodities markets in 2025.

The Mexican aluminum scrap market braces for potential complications and volatility in 2025 expected from US President-elect Donald Trump's proposed tariffs on goods from Mexico, Canada and China, market participants said.

Mexico ranks third among countries worldwide that export metals to the US, with a total annual production valued at $28.18 billion.

As a result, Mexican aluminum scrap might be impacted by such tariffs, especially for used beverage cans, which relies on exporting. However, it remains unclear how the proposed tariffs will affect supply and demand.

A smelter source from the Bajio region said they expected 2025 would be more dynamic than 2024 and possibly unstable, with prices and demand affected by US tariffs and ongoing trade wars with the US and China.

A scrap dealer source in the Northwest expected that 2025 would see higher prices and more abundant material circulating in the market, unlike 2024, which they characterized as muted.

A second scrap dealer in Central Mexico said that 2025 will be affected by the incoming Trump administration in the US.

"Appetite for exports will go down and the exchange rate will continue to affect prices and demand," the second dealer said.

A third smelter source in the Bajio region said prices might decrease in 2025 due to the potential tariffs, as fewer vehicles will be exported to the US.

A third scrap dealer source in the Northeast said that while prices increased for Mexican aluminum scrap in 2024, "what goes up, must come down."

Conversely, a fourth smelter source in Bajio said he thought the Mexican aluminum market would be unaffected by potential US tariffs in the new year.

"There is a lot of investment and projects starting up, the Mexican aluminum market will be prosperous next year," the smelter source added.

Old cast, old sheet spread narrows

The price spread between old cast and old sheet has narrowed across 2024, in part due to old sheet's higher silicon content compared to old cast.

The spread between the two products stood at 3 pesos as of Dec. 5, with Platts, part of S&P Global Commodity Insights, assessing old cast at Peso 40-41/kg and old sheet at Peso 37-38/kg on the day.

Old cast prices ultimately increased by 12.5% between Jan. 4 and Dec. 5, while old sheet prices rose 29.31%, Commodity Insights data showed.

Old cast and old sheet in Mexico started 2024 at a spread of about Peso 7/kg; Platts assessed old cast and old sheet at Peso 35.50-36.50/kg and Peso 28.50-29.50/kg, respectively, on Jan. 4.

During the first half of 2024, old cast prices mostly remained flat, while old sheet prices increased, except for in late June, when Mexican President Claudia Sheinbaum's election caused an increase in the dollar-peso exchange rate. The exchange rate increase then inflated Mexican aluminum scrap prices. However, while old cast prices stagnated after that mid-year increase, old sheet kept rising toward the end of the year.

Just as old sheet prices jumped while old cast prices stayed stable, silicon 553 US Midwest prices started to decrease, dropping from a high of 205 cents/lb on June 12 to 140 cents/lb on Dec. 4, according to Commodity Insights data.

The decline implies buyers took advantage of low silicon prices to utilize old sheet rather than old cast, helping reduce the spread between both types of aluminum scrap.

UBC prices soar on strong US dollar, export demand

The UBC market saw the largest increase in 2024, with prices rising from Peso 24-25/kg on Jan. 4 to Peso 41.5-42.5/kg on Dec. 5, marking a 70% rise on the high end, according to Commodity Insights data.

The increase was influenced by growing export demand and an elevated dollar-peso exchange rate.

Prices slowly started rising in the first few months of 2024 before jumping in June following the Mexican elections. Prices for used beverage cans especially picked up following the US elections on Nov. 5.