Premiums for consumers buying aluminum on the physical market in the U.S. have hit record highs, driven by steep import tariffs and tight supplies globally.
U.S. President Donald Trump doubled tariffs on aluminum imports to 50 per cent on June 4 with the aim of supporting investment in U.S. production of the metal, which is used in construction as well as power and packaging.
Buyers on the U.S. physical market typically pay the benchmark price on the London Metal Exchange plus a premium that covers costs such as freight and taxes.
The duty-paid Midwest premium has surged since June, hitting a record 88.10 cents a pound AUPX25 or US$1,942 a metric ton on Friday. Added to the aluminum price CMAL3 of $2,850 a tonne, a U.S. buyer in the spot market would pay $4,792 a ton.
At $2,850 a ton, the duty on U.S. aluminum imports would be $1,425, up from around $560 a ton at the start of the year.
Consultancy Harbor Aluminum said the surge was also due to falling aluminum stocks in the U.S. and a “strong conviction” that the tariffs would be permanent, without any exemptions for Canada after Trump called off trade negotiations with its neighbor in October.
U.S. aluminum imports from Canada were more than 2.7 million tonnes or 70 per cent of the total last year, according to Trade Data Monitor.
“Trump basically said no deal until the end of his term. So even the optimists around a potential deal have retreated from their position for now,” said Dmitri Ceres at U.S.-based aluminum trader PerenniAL.
U.S. consumers also face intense competition sourcing aluminum, partly due to China’s 45 million ton production cap.
Panmure Liberum analyst Tom Price expects an aluminum market deficit of 1.8 million tons this year.
“Over the last 2-3 years, China’s net exports of refined metal and semi fabricated products have fallen by 900,000 tons a year to 1.9 million tons a year,” Price said.
“Over the same period, aluminum metal production outside China has fallen 1.1 million tons a year. Together, that’s a two million ton decline in aluminum availability outside China.” (Reporting by Pratima Desai; editing by Alexander Smith)
