Analysis of the correlation between copper and aluminum industries and in-depth interpretation of the impact of tariff policies

1. Aluminum Industry: Structural Adjustment under Tariff Policies and the Rise of Recycled Aluminum

Tariff policy drives supply chain restructuring

The Trump administration has raised aluminum import tariffs from 10% to 25% and cancelled exemptions for Canada and Mexico, directly impacting the global aluminum trade landscape. The dependence of the United States on aluminum imports has reached 44%, of which 76% comes from Canada. Tariff policies will lead to Canadian aluminum turning to the EU market, exacerbating the EU supply surplus. Historical data shows that when Trump imposed a 10% aluminum tariff during his first term in 2018, the prices of Shanghai and London aluminum rebounded after a short-term decline, indicating that global supply and demand fundamentals still dominate price trends. However, the cost of tariffs will eventually be passed on to downstream industries in the United States, such as automobiles and construction.

Upgrading of China’s aluminum industry and dual carbon opportunities

As the world’s largest aluminum producer (accounting for 58% of global production in 2024), China is driving industry transformation through its “dual carbon” strategy. The recycled aluminum industry has experienced explosive growth, with a production of 9.5 million tons in 2024, a year-on-year increase of 22%, accounting for 20% of the total aluminum supply. The Yangtze River Delta region has formed a complete waste aluminum recycling industry chain, with leading enterprises reducing their energy consumption of recycled aluminum to less than 5% of primary aluminum. The products are widely used in automotive lightweighting (the proportion of aluminum consumption in new energy vehicles has increased from 3% to 12%) and photovoltaic fields (the amount of aluminum used in photovoltaics will reach 1.8 million tons by 2024). High end aluminum materials are accelerating import substitution, and the third-generation aluminum lithium alloy of Southwest Aluminum Industry of China Aluminum has been used in the C919 aircraft. Nanshan Aluminum Industry has become a Boeing certified supplier.

Supply and demand pattern and cost transmission

The US aluminum tariff policy has led to an increase in import costs, but domestic production is difficult to quickly fill the gap. In 2024, the US aluminum production will only be 8.6 million tons, and capacity expansion is constrained by energy costs. The cost of tariffs will be transmitted to end consumers through the industrial chain, such as increasing the cost of each vehicle in automobile manufacturing by over $1000. The Chinese aluminum industry has been forced to develop with precision through the “ceiling” policy of production capacity (controlled at 45 million tons), and the profit per ton of aluminum will reach 1800 yuan in 2024, establishing a healthy development trend in the industry.

2. Copper industry: Tariff investigation triggers supply security game and price fluctuations

Trump 232 Investigation and Strategic Resource Competition

The Trump administration has launched a Section 232 investigation into copper, aiming to classify it as a “national security critical material” and potentially impose tariffs on major suppliers such as Chile and Canada. The United States has a high dependence on copper imports, and tariff policies will push up costs in strategic areas such as electric vehicles and semiconductors. The market has experienced a rush to sell, with New York copper futures prices rising by 2.4% at one point, and US copper mining companies’ stock prices (such as McMoran Copper Gold) rising by over 6% after hours.

Global supply chain risks and countermeasures expectations

If a 25% tariff is imposed on copper, it may trigger countermeasures from major suppliers. Chile, as the world’s largest copper exporter, faces the risk of power grid failures coupled with tariff restrictions, which could lead to drastic fluctuations in global copper prices. Historical experience has shown that Section 232 tariffs often trigger WTO litigation and retaliation from trading partners, such as Canada and the European Union planning to impose retaliatory tariffs on US goods, which may impact US agricultural and manufacturing exports.

Copper aluminum price linkage and market substitution effect

There is a significant correlation between the price trends of copper and aluminum, especially when the demand for infrastructure and manufacturing resonates. The rise in aluminum prices may partially replace the demand for copper, such as the substitution of aluminum for copper in the trend of automotive lightweighting. But the irreplaceability of copper in fields such as power transmission and semiconductors makes its tariff policy have a more profound impact on the global industrial chain. If the United States imposes tariffs on copper, it may push up global copper prices, while indirectly exacerbating the volatility of the aluminum market due to the linkage effect of aluminum prices.

3.  Industry Outlook: Opportunities and Challenges under Policy Gaming

Aluminum industry: Recycled aluminum and high-end dual wheel drive

The Chinese aluminum industry will continue the path of “total quantity control and structural optimization”, and it is expected that the production of recycled aluminum will reach 15 million tons by 2028, and the scale of the high-end aluminum market (aviation and automotive panels) will exceed 35 billion yuan. Enterprises need to pay attention to the closed-loop construction of waste aluminum recycling system (such as Shunbo Alloy’s regional layout) and technological breakthroughs (such as 7xxx series high-strength aluminum alloy).

Copper industry: supply security and trade risks coexist

Trump’s tariff policies may accelerate the restructuring of the global copper supply chain, and the expansion of domestic production capacity in the United States (such as Rio Tinto’s Arizona copper mine) will take time to verify. The Chinese copper industry needs to be vigilant about the cost transmission caused by tariffs, while seizing opportunities for demand growth in areas such as new energy vehicles and AI.

The Long term Impact of Policy Gaming on the Market

The essence of tariff policy is to “exchange consumer costs for industrial protection”, which may suppress global trade efficiency in the long run. Enterprises need to hedge risks through diversified procurement and regional layout (such as Southeast Asian transit trade), while paying attention to changes in WTO rules and progress in regional trade agreements (such as CPTPP).

Overall, the copper and aluminum industry is facing a dual transformation of tariff policies and industrial upgrading. The aluminum industry achieves resilient growth through recycled aluminum and high-end technology, while the copper industry needs to seek a balance between supply security and trade risks. Policy games may exacerbate short-term price fluctuations, but the global trend towards carbon neutrality and the demand for manufacturing upgrading still provide solid support for the long-term development of the industry.