Mexico: cautious market re-entry from buyers

Mexico’s aluminium scrap market has undergone a sharp shift in sentiment over the past month, reflecting both the macro-economic slowdown and evolving trade tensions. From early April through the first week of May, prices across most scrap grades initially fell under pressure from tariff-related uncertainty before partially recovering amid signs of stabilising demand and favourable currency movements.

In early April, uncertainty over US Section 232 aluminium tariffs (in force since March 12) and fears of additional 25% tariffs combined to depress buying activity. Most grades saw significant drops, with UBCs and extrusion scrap hit the hardest amid stalled consumer demand. By late April, a temporary pause on additional US tariffs and a stable LME encouraged the cautious re-entry of buyers. However, demand remained soft and spreads widened to accommodate price risk.

In the first week of May, there was a slight rebound in buyer appetite, especially for Taint Tabor and extrusion scrap; this was reflected in stronger pricing for these grades. Sentiment improved as greater clarity over US policy and exchange rate stability encouraged restocking.

Higher pricing for export-driven grades such as UBCs and extrusion suggests increased outbound flows, especially after domestic demand weakened. Domestic generation has been constrained by weak industrial activity and a declining automotive output.

The Dallas Fed revised Mexico’s 2025 GDP growth forecast to 0.5%, driven by low industrial output and declining exports. Mexico’s auto exports declined for the third straight month to record the worst first quarter since 2021. This has reduced demand for secondary aluminium used in castings, sheet and extruded components.

It appears that the aluminium scrap market bottomed out in mid-April. If current trade conditions hold and the auto sector begins to stabilise, demand for clean extrusion and UBCs may strengthen modestly.