"US Physical Aluminium Premiums Soar to Record High on Trump Tariffs"

The US aluminium market is in turmoil as physical aluminium premiums surge to unprecedented levels. The looming threat of 25% tariffs on aluminium imports, set to take effect from March 12, has sent shockwaves through the industry. This move by U.S. President Donald Trump is expected to significantly impact the supply and demand dynamics, leading to higher costs for manufacturers and potential shortages in the US market.

The US Midwest duty-paid aluminium premium has skyrocketed to above 40 U.S. cents a lb or nearly $900 a metric ton, marking a nearly 60% increase since the start of 2025. This surge is a direct response to the impending tariffs, which will apply to imports from Argentina, Australia, Canada, Mexico, European Union countries, and the UK. Canadian smelters, which account for 70% of primary and alloyed aluminium exports to the US, are particularly affected by these tariffs.

The tariffs are expected to have both short-term and long-term effects on the aluminium market. In the short term, the increased costs will likely be passed on to consumers, leading to higher prices for aluminium-intensive products such as cars, construction materials, and packaging. Bank of America analyst Michael Widmer noted, "Producers will not want to pay the tariff, they will try to pass on as much as they can to consumers." This could result in a premium rise to near 47 cents a lb to fully account for the 25% levy.

In the long term, the tariffs may incentivize aluminium production within the US to meet domestic demand. However, the US currently lacks the capacity to produce all the aluminium it needs. Eivind Kallevik, CEO at Norwegian aluminium producer Hydro, stated, "The US cannot produce all that aluminum, they don't have the capacity." This lack of capacity could force the US to attract aluminium at higher premiums and costs, potentially leading to a diversion of aluminium supplies to other markets, such as Europe.

The diversion of aluminium supplies to Europe, where duty-paid physical market premiums have dropped to 11-month lows at $240 a metric ton, down 35% since the start of 2025, could have significant implications for the US manufacturing sector. The US is a net importer of aluminium, and the diversion of supplies could lead to shortages and increased costs for manufacturers. This could affect the production of products like cars and packaging, which heavily depend on aluminium.

To mitigate the increased costs resulting from the tariffs, US aluminium producers and consumers might adopt several strategies. These strategies could significantly influence the overall market dynamics and pricing. For example, US aluminium producers might try to pass on as much of the tariff cost as possible to consumers. This strategy could lead to higher premiums for aluminium in the US market. Widmer also mentioned that the premium may have to rise to near 47 cents a lb to fully account for a 25% levy. This would result in increased costs for industries that rely heavily on aluminium, such as transport, construction, and packaging.

In conclusion, the 25% tariffs on aluminium imports are expected to have significant short-term and long-term effects on the US aluminium market. The increased costs and potential shortages could lead to higher prices for aluminium-intensive products and affect the production of products like cars and packaging. The diversion of aluminium supplies to Europe could also have significant implications for the US manufacturing sector. To mitigate these effects, US aluminium producers and consumers might adopt several strategies, such as passing on costs to consumers, seeking alternative suppliers, and increasing domestic production. However, these strategies could also lead to higher premiums, potential shortages, and increased costs in the US market.