EU and UK Move Toward Linking Carbon Markets

EU and UK

The EU and UK have formally agreed to work toward linking their carbon emissions trading systems (ETS), a move expected to benefit both industries and climate policy alignment. The announcement, made during a summit in London, emphasized that a EU and UK carbon markets link would support fair trade and reduce carbon leakage between jurisdictions. According to the joint statement, such a link would also exempt both regions from their respective carbon border adjustment mechanisms (CBAM), providing a more level playing field for domestic industries while maintaining environmental ambition.

ETS Link Could Unlock Significant Economic Gains

The linking of the EU and UK carbon markets could generate significant cost savings. UK Prime Minister Keir Starmer claimed British businesses could save £800 million in EU carbon taxes, while a recent industry-commissioned study projected up to €1.2 billion in savings from lower hedging costs due to improved market liquidity. While there is no timeline for implementation, market participants note that linking the Swiss ETS to the EU’s system took nearly a decade. Still, the potential economic efficiency and regulatory clarity have made the EU and UK carbon markets discussion a top priority for energy-intensive sectors across Europe.

Shared Climate Goals, Independent Ambitions

The agreement stressed that neither side should be constrained from pursuing more ambitious climate goals. The UK’s ETS remains guided by the legally binding Climate Change Act and its Paris Agreement commitments. The UK targets a 68% GHG reduction by 2030 and 81% by 2035, compared to 1990 levels. The EU aims for a 55% net reduction by 2030 and is still shaping its 2035 benchmark. Despite regulatory differences, both jurisdictions reaffirmed their commitment to net-zero emissions by 2050. The agreement also includes cooperation on hydrogen, CCS, biomethane, and a potential UK entry into the EU’s internal power market—further aligning EU and UK carbon markets within a broader clean energy framework.

The Metalnomist Commentary

The potential linkage of EU and UK carbon markets signals a return to pragmatic climate diplomacy. While structural alignment will take time, the economic and environmental incentives suggest both sides are committed to meaningful integration—setting a precedent for future carbon market collaborations globally.

Europe EV Growth Rises as Incentives Mask Fragile Demand Signals

Europe EV

Europe EV growth accelerated last month as battery electric vehicle sales rose by 41%, supported by tax incentives, fleet buying and carmakers’ efforts to meet emissions targets. The increase looks strong on paper, but the drivers of demand remain uneven across markets.

Battery electric vehicle sales outpaced plug-in hybrid sales, which rose by 32% across the EU, EFTA and UK. Regular hybrid vehicle sales increased by 15%, while petrol and diesel sales continued to decline across major European markets.

Europe EV growth was strongest in large markets such as France, Germany and Italy. Spain again stood out for plug-in hybrid growth, showing that national policy, consumer economics and model availability continue to shape adoption differently.

The headline growth is important for battery metals and automotive supply chains. Higher BEV sales support long-term demand for lithium, nickel, manganese, graphite, copper, aluminium and rare earth magnets.

Incentives and Fleet Orders Drive the Near-Term Recovery

Tax policy remains one of the main engines behind Europe EV growth. Several member states entered the year with revised company car rules, income-linked subsidies or accelerated depreciation schemes for electric vehicles.

These measures have favoured fleet buyers more than private consumers. Corporate fleets can respond faster to tax incentives, depreciation benefits and emissions rules because they buy vehicles in larger volumes and plan replacements more systematically.

France has tightened the link between EV support and income. Germany’s recovery has been supported by targeted incentives reintroduced in January after earlier policy volatility disrupted demand.

This matters because fleet-led growth can be less stable than broad consumer adoption. Fleet orders can lift sales quickly, but private demand is still sensitive to price, charging access, financing costs and residual value concerns.

Carmakers are also working to meet CO₂ limits. This creates another demand driver that is not purely consumer-led. Automakers may use pricing, leasing and fleet channels to push EV registrations when regulatory targets tighten.

For metals markets, the distinction matters. Stable private adoption creates more predictable battery material demand. Incentive-driven fleet demand can be more volatile if policy changes or budget support weakens.

Oil Shock Adds Uncertainty to EV Demand Outlook

Higher oil prices after the US-Iran war have revived the question of whether fuel costs are pushing consumers toward electric vehicles. However, the evidence is not yet clear.

EV demand was already rising in key markets before the oil shock. Early-year growth appears to reflect incentives, fleet orders and emissions compliance more than a direct consumer shift caused by higher fuel costs.

There is also a timing lag. Vehicle orders usually appear in sales data several weeks later, and delivery times vary by model and country. Any clear oil-price effect may not appear until June or July.

This caution is important because monthly EV data can be distorted by local registration patterns. The UK, for example, often sees a March registration spike because of its plate change system.

The broader strategic message remains clear. If Europe wants to reduce exposure to oil shocks, it needs consistent carbon rules, pollution-based taxation, charging infrastructure and long-term industrial policy.

Stop-start subsidies can create temporary sales jumps, but they can also damage market confidence. Stable rules are more useful for automakers, battery producers, charging companies and metals suppliers.

Europe EV growth therefore remains real but fragile. The region is moving away from petrol and diesel, yet the pace still depends heavily on policy design and fleet purchasing behaviour.

The Metalnomist Commentary

Europe EV growth is not yet a clean demand signal for battery metals because incentives and fleet buying are doing much of the work. The stronger long-term signal will come when private buyers adopt EVs without policy volatility or fuel-price panic.

Enduring Reliance Amid Sanctions: Europe’s Russian Titanium Dilemma

VSMPO Titanium

Introduction: A Supply Chain Unbroken in Wartime

Despite sweeping economic sanctions imposed by the West following Russia’s invasion of Ukraine in February 2022, one supply chain has proved remarkably resilient: Russian titanium sponge. Europe’s quandary over this advanced material—indispensable to aerospace, defense, and medical-device manufacturing—has only deepened.

Russia’s Command of Titanium

Russia ranks among the world’s largest titanium producers. VSMPO-AVISMA, the country’s flagship producer, accounts for 90% of Russia’s titanium output and exports to some 50 countries. The company is estimated to control up to 30% of the global titanium market and nearly half of aerospace-grade supply.

Russia’s dominance rests on abundant raw-material reserves and comparatively low energy costs. Because titanium smelting is energy-intensive, commercial viability depends on cheap power and gas—conditions Russia has historically met.

Airbus A380

Trade that Continues Despite Sanctions

On 7 March 2022, Boeing announced it would halt purchases of Russian titanium used in aircraft manufacturing. Rolls-Royce and Boeing subsequently suspended procurement from VSMPO-AVISMA indefinitely.

Europe, however, charted a different course. Airbus urged the European Union to keep Russian titanium outside future sanctions packages. As Airbus chief executive Guillaume Faury argued, titanium represents a small share of Russia’s total exports, so sanctions would inflict little pain on Moscow while dealing a heavy blow to Europe’s aerospace industry.

Today, Airbus still sources roughly half of its titanium from VSMPO-AVISMA. Boeing, by contrast, once relied on Russia for about one-third of its titanium but has since stopped buying Russian material.

The Limits—and Exceptions—of EU Sanctions

Notably, while the EU has restricted imports of Russian steel and coal, titanium has not been sanctioned. The metal remains a strategic material used in fuselages, turbine blades, satellites, and other critical systems.

Dependence on Russian metals endures in other segments as well. From March to June 2022, combined EU-US imports of Russian aluminum and nickel rose to $1.98 billion—more than 70% above the prior-year period.

Washington and Brussels have generally refrained from designating industrial metals as sanction targets. Europe continues to import large volumes of Russian natural gas, and Russia supplies about 40% of global palladium—vital for semiconductors—implicating everything from automobiles to smartphones.

CBAM

CBAM: A New Variable

The EU’s Carbon Border Adjustment Mechanism (CBAM), introduced in October 2023, adds another layer of complexity. CBAM initially covers cement, electricity, fertilizers, iron and steel, aluminum, hydrogen, and certain downstream products in steel and aluminum. After a transition phase through 2025, full implementation begins in 2026, imposing carbon costs on imports equivalent to those borne by EU producers.

While fertilizers, cement, hydrogen, and non-exported electricity may see limited near-term impact, aluminum stands out as a key target sector. Most exports to the EU beyond steel and aluminum are not yet covered, though the European Commission has signaled possible expansion to high-leakage categories such as organic chemicals and plastics.

Russia is structurally disadvantaged under CBAM. Steel production in Russia, Ukraine, and Türkiye tends to be more carbon-intensive, implying higher embedded-carbon costs at the border.

Ambiguities in Sanctions and Industry’s Dilemma

The United States placed VSMPO-AVISMA on its “military end-user” list, restricting access to advanced technologies, but stopped short of a direct ban on titanium sales—an acknowledgment of global industry’s reliance on the material.

Indeed, during the early stages of the war, VSMPO-AVISMA avoided sweeping US and European sanctions. Although Washington temporarily listed the company in December 2020, the measure was later rescinded.

Recent moves, however, suggest a tightening environment. In April 2024, a joint US-UK action prompted the CME and LME to prohibit trade in newly produced Russian aluminum, copper, and nickel dated after 13 April—an effort widely read as constraining Russia’s influence in metals markets.

Ukraine Titanium Mine

Ukraine: A Viable Alternative?

Against this backdrop, Ukraine has emerged as a potential alternative. Until 2020, the country supplied 90% of Russia’s ilmenite—the feedstock for titanium sponge. With that supply chain severed by war, Ukrainian resources could help challenge Russia’s dominance.

US companies have begun talks with Kyiv on a joint venture anchored by the Zaporizhzhia Titanium-Magnesium Plant (ZTMP). Such partnerships could forge a new titanium hub in Eastern Europe, strengthening Ukraine’s economic footing for decades.

The risks are significant. Ongoing conflict and occupation threaten both Donbas deposits and the ZTMP facilities, which remain exposed to shelling and sabotage.

Aviation’s Growth—and Its Dilemma

The aerospace-titanium market was valued at roughly $100 million in 2022 and is projected to grow at a CAGR exceeding 5% from 2023 to 2032—reflecting the rebound in air travel and a pipeline of commercial aircraft programs.

Despite supply-chain turbulence from war, energy constraints, and labor shortages, passenger traffic continues to recover, lifting titanium demand. In October 2022, Airbus announced plans to deliver more than one aircraft per week to India, persisting with expansion despite engine-supply challenges and domestic carrier capacity constraints—developments that further complicate titanium sourcing.

The Reality of Diversification

Boeing reportedly began diversifying away from Russian titanium after the 2014 annexation of Crimea. Airbus, by contrast, remains heavily reliant on Russian supply.

Globally, China produced around 100,000 t of titanium in 2013—twice the combined output of Russia and Japan at the time—making it the world’s largest producer. Japan ranked third, with Osaka Titanium Technologies standing as the world’s second-largest producer of titanium sponge.

The Metalnomist Commentary: An Unfinished Dilemma

Europe’s struggle over Russian titanium sponge epitomizes the knotty realities of modern supply chains. Between economic sanctions and security imperatives, between industrial competitiveness and moral principle, Europe has yet to find a definitive answer.

With CBAM’s full force arriving in 2026, higher carbon-cost pass-throughs on Russian metals seem likely, intensifying pressure to rewire supply. Yet, as Airbus’s position illustrates, displacing Russian titanium in the short term remains daunting.

The gap between industrial necessity and political sanction endures—witness VSMPO-AVISMA’s August 2025 statement that it stands ready to resume cooperation with Boeing. For now, Europe must navigate this dilemma with prudence: balancing sanction principles, industrial realities, and emergent environmental rules—while accelerating the use of recycled titanium wherever feasible.

2026 Global Temperature Forecast Signals Rising Risk for Metals and Supply Chains

UK Met Office

The 2026 global temperature forecast signals another year of extreme operational risk for industry. UK Met Office expects 2026 to rank among the four warmest years recorded. The 2026 global temperature forecast sets a central estimate of 1.46°C above pre-industrial levels. Therefore, firms should stress-test energy, logistics, and metal supply plans now.

Why the 2026 global temperature forecast matters for metals and manufacturing

Higher heat raises power demand and tightens electricity markets for smelters and refineries. Meanwhile, grids face higher peak loads from cooling and data centers. As a result, aluminium, copper, and steel producers may see higher volatility in power prices. Operators can hedge by securing long-term PPAs and improving thermal efficiency.

Heat also increases physical disruption risk across ports, mines, and rail corridors. However, companies can reduce downtime with heat-ready maintenance windows and resilient water systems. Wildfire and drought risk can tighten concentrate flows and raise insurance costs. Therefore, buyers will pay more for reliable delivery and low-risk jurisdictions.

Policy pressure rises as annual temperatures stay near 1.5°C

The 2026 global temperature forecast reinforces tougher climate policy and carbon pricing trends. The Met Office projects a range of 1.34°C to 1.58°C above pre-industrial levels. Meanwhile, the world logged 1.55°C in 2024, the hottest year on record. Therefore, procurement teams will face faster moves toward verified low-carbon materials.

Supply chains will compete for low-emissions inputs as standards tighten. However, many sectors still rely on older assets that lock in higher fuel burn. As a result, demand for electrification metals and recycling capacity should stay robust. Companies that measure embedded emissions will win tenders and avoid surprises.

The Metalnomist Commentary

This forecast does not change the Paris framework on its own. However, it sharpens the business case for heat resilience and green power contracts. Metals leaders can treat climate volatility as a cost line they can manage.

Hydro European Extrusion Plant Closures Signal Deeper Pressure in Aluminium Demand

Hydro

Hydro European extrusion plant closures are expanding as the Norwegian aluminium producer adds the Luce plant in France to its restructuring plan. The move brings the number of European extrusion plants targeted for closure in 2026 to six, reflecting continued weakness in regional aluminium demand.

Hydro previously announced plans to close extrusion plants in Cheltenham and Bedwas in the UK, Ludenscheid in Germany, Feltre in Italy, and Drunen in the Netherlands. The two UK closures have been confirmed and are scheduled for the second quarter.

Hydro European extrusion plant closures show that aluminium processors are still adapting to weak construction, automotive, and industrial demand across Europe. The company also closed its Birtley extrusion plant in the UK in May, underlining the scale of its capacity adjustment.

European Aluminium Extrusion Market Remains Under Pressure

The European aluminium extrusion market continues to face difficult operating conditions. Weak demand, high costs, and margin pressure are forcing producers to reassess plant networks and remove capacity from less competitive sites.

Hydro said the European market remains challenging and that further action is needed. The planned Luce closure fits into a broader effort to align capacity with demand while maintaining service levels in key markets such as France.

If all planned closures are completed, Hydro will retain 27 extrusion plants and five recycling facilities in its European extrusion business. This suggests the company is not exiting Europe, but reshaping its footprint around fewer, more competitive assets.

Luce Closure Adds Cost but Supports Long-Term Restructuring

Hydro estimates total restructuring costs related to the Luce closure at Nkr260mn, or about $27.2mn. Around Nkr5mn will affect the company’s adjusted earnings in the first quarter.

The near-term cost is part of a wider restructuring logic. Aluminium extrusion producers need scale, utilization, efficient logistics, and competitive energy and labour cost structures to protect margins in a weak market.

Hydro European extrusion plant closures also highlight a broader issue for Europe’s downstream aluminium sector. Demand recovery remains uncertain, while producers must continue investing in recycling, low-carbon aluminium, and higher-value applications to remain competitive.

The Metalnomist Commentary

Hydro’s restructuring shows that Europe’s aluminium challenge is moving downstream, not staying limited to smelting. The winners will be producers that can combine leaner capacity, recycling integration, and higher-value customer segments before demand fully recovers.

Japan’s Sumitomo Chemical Exits Brazilian Aluminium Refining: Focus on Business Optimization

Sumitomo Chemical

Japanese petrochemical giant, Sumitomo Chemical, has sold its 2.97% stake in Nippon Amazon Aluminium Co. (NAAC) to YKK AP, a domestic architectural goods supplier, as part of its broader business optimization strategy. With this transaction finalized on December 19, YKK AP's stake in NAAC has risen to 6.31% from 2.02%. While the financial details of the transaction were not disclosed, the move signifies a strategic shift for Sumitomo Chemical as it exits overseas aluminium refining operations.

NAAC holds a 49% stake in Aluminio Brasileiro S.A. (Albras), a Brazilian aluminium refiner renowned for producing 450,000 tons of aluminum ingots annually. Albras operates using renewable energy, making it a key player in reducing CO2 emissions in the aluminium production process. This aligns with growing global demand for sustainable and low-carbon aluminium products.

YKK AP's Green Aluminium Expansion

The deal positions YKK AP to double its aluminium ingot output, an important milestone in its efforts to procure green aluminium feedstock and decarbonize its operations. The company uses approximately 140,000 tons of aluminium annually within Japan. This acquisition is part of YKK AP's push to adopt sustainable materials and strengthen its competitiveness in the eco-conscious global market.

Sumitomo Chemical’s Broader Realignments

Sumitomo Chemical’s decision to sell its NAAC shares marks a complete withdrawal from the overseas aluminium ingot business. The company cited high profitability volatility in imported aluminium markets, largely influenced by fluctuating global aluminium prices. Earlier in the year, Sumitomo Chemical divested its shares in New Zealand Aluminium Smelters and Boyne Smelters to Rio Tinto, the UK-Australian mining conglomerate.

The company has also exited from two polypropylene (PP) compound manufacturing subsidiaries in China due to intensifying competition from local producers. Announced on December 18, this move reflects Sumitomo Chemical’s focus on optimizing its business portfolio by concentrating on more stable and profitable ventures.

European Aluminium Industry Pushes for Scrap Export Restrictions

Al scrap

Rising Pressure for Scrap Export Controls

The European aluminium scrap market is facing mounting pressure as supply tightness collides with strong export demand. Industry groups such as European Aluminium and Aluminium Deutschland have intensified lobbying for export tariffs to secure domestic scrap supply. Their push comes as the US raises tariffs on primary aluminium imports, potentially boosting American demand for European scrap.

Exports of European aluminium scrap surged in recent years, particularly to Asia. The EU and UK together shipped 1.57mn tonnes in 2024, a 23pc increase compared with 2022. India and China accounted for the bulk of these flows, while exports to the US, though smaller, grew sharply. European Aluminium warned that rising US interest, combined with current supply shortages, risks creating a “full-blown scrap crisis.”

Industry Debate and Market Risks

However, not all stakeholders agree that restrictions are the solution. Scrap merchants argue that supply shortfalls are driven more by weak industrial activity than by exports. Low production in automotive, construction, and machinery has reduced available grades like aluminium turnings, which are essential for European secondary smelters. They caution that tariffs may not address these structural issues and could trigger reciprocal trade barriers, complicating Europe’s own scrap imports.

At the same time, many producers identify high energy costs as the bigger threat to smelter viability. Merchants note that no smelter closures have been directly tied to scrap shortages, while escalating electricity prices have forced cutbacks. Despite this, calls for restrictions continue to gain traction, reflecting a broader trend of resource nationalism as countries prioritize domestic recycling over exports.

The Metalnomist Commentary

The debate over aluminium scrap export restrictions underscores a critical tension between free trade and industrial security. While tariffs may stabilize domestic availability, they risk distorting markets and inviting retaliation. The EU must weigh these risks carefully, especially as global competition for low-carbon feedstock intensifies. Energy costs, more than scrap scarcity, remain the sector’s existential challenge.

Rio Tinto to Test Titanium and Scandium Sorting Technology

Rio Tinto Titanium Mining

Rio Tinto Invests in Ore-Sorting Innovation

UK-Australian mining firm Rio Tinto will invest C$7.6mn ($5.6mn) to test a new ore-sorting technology at its Lac Tio mine in Quebec, Canada. The technology will sort ore based on titanium and scandium content directly at the source, reducing the amount of material transported to Rio Tinto’s iron and titanium metallurgical and critical minerals complex in Quebec.

The government of Quebec will contribute C$2.5mn ($1.8mn) through its support program for critical and strategic metals processing. This partnership underscores the region’s focus on developing advanced processing capacity for critical minerals.

Importance of Titanium and Scandium in Global Markets

Rio Tinto’s Quebec operations already produce titanium dioxide, covering 19% of global demand, alongside scandium oxide. Titanium dioxide is widely used in pigments and sunscreens, while scandium oxide plays a vital role in high-strength aluminum alloys for aircraft, as well as in electronic ceramics and glass.

As a result, the new sorting technology has the potential to increase efficiency, reduce carbon intensity, and strengthen North America’s position in critical minerals supply chains. By advancing titanium and scandium processing, Rio Tinto could also enhance the security of supply for industries facing rising demand.

The Metalnomist Commentary

Rio Tinto’s investment in titanium and scandium ore-sorting technology signals a clear shift toward greater efficiency and sustainability in critical minerals. By reducing transport needs and improving resource utilization, the project strengthens Quebec’s role as a global hub for strategic materials. This initiative also highlights the increasing importance of scandium, a rare but essential element for advanced manufacturing.

Europe Faces Challenges in Strategic Battery Funding Amid Market Oversupply

EU Battery

European countries are struggling to adopt a unified and strategic approach to funding domestic battery supply chains as global oversupply of battery materials, led by China, continues to push prices lower through at least 2030. These issues were a key focus of the Future Battery Forum held this week in Berlin, Germany.

Oversupply in Battery Materials

The battery materials market, including nickel and cobalt, faces oversupply due to significant production increases from Indonesia and the Democratic Republic of Congo (DRC). According to Siyamend Al Barazi, head of unit mineral economics at Germany’s Dera (German Mineral Resources Agency), "markets will be oversupplied at least until 2030." China's state subsidies, estimated at $230 billion from 2009 to 2023, have further contributed to this glut, maintaining downward pressure on global prices.

European Critical Raw Material Challenges

Despite the establishment of the EU Critical Raw Material Act (CRMA), which identifies 34 critical and 17 strategic materials vital to green and digital technologies, European funding efforts fall short of addressing the massive investment needs for battery material production and processing.

In September, Germany's KfW bank approved a €1 billion raw materials fund, while similar initiatives were launched by Italy, France, and the UK. However, panelists at the forum, including Jonathan Vanherberghen from Rio Tinto, argued that these amounts are insufficient for large-scale projects. For example, the capital expenditure for Rio Tinto's Jadar lithium project in Serbia alone stands at $2.5 billion.

Fragmented Funding and Industry Concerns

The fragmented funding landscape in Europe has made it difficult to pool resources effectively. Vanherberghen noted that funds like KfW’s could be more impactful if extended over longer periods to accommodate changing market cycles. Similarly, Cris Moreno, CEO of Vulcan Energy, highlighted that funding of at least $1 billion annually is required to meet the region’s ambitions. Moreno’s own lithium project in Germany has an estimated cost of $1.4 billion.

Despite the challenges, these funding initiatives provide some support by attracting institutional investors and fostering collaboration with car manufacturers, which are under increasing pressure to meet carbon targets and ESG (Environmental, Social, and Governance) standards.

Toward a Unified European Strategy

Experts at the forum emphasized the need for a more unified and sizeable funding mechanism to bolster Europe’s battery supply chain. A single, cohesive approach would allow Europe to compete with countries like China, South Korea, and Japan, where government support for raw material projects is significantly more robust.

Vanherberghen concluded, "Funds like that will only support projects with the highest ESG standards. Bringing these things together could create a much more effective system than the fragmented approach currently in place."