Aluminium premium hits record in US on tariffs, global squeeze

U.S. physical aluminium premiums have surged to record highs, reaching 88.10 cents per pound ($1,942 per metric ton), pushing the total cost for U.S. buyers to $4,792 per ton. This increase is primarily attributed to the Trump administration's doubled 50% import tariffs and tightening global supplies, compounded by falling U.S. inventories and the market's conviction that tariffs, particularly after failed Canada trade talks, will be permanent. Analysts project a 1.8 million-ton aluminium market deficit this year, citing China's production caps and a combined 2 million-ton reduction in global availability outside China, signaling sustained upward price pressure.

Analysis

U.S. physical aluminium premiums have reached unprecedented levels, with the duty-paid Midwest premium surging to a record 88.10 cents per pound, or $1,942 per metric ton. This elevated premium, combined with the London Metal Exchange price of $2,850 per ton, results in a total cost of $4,792 per ton for U.S. spot buyers. The primary driver is the 50% import tariff, doubled by President Trump on June 4, which now accounts for $1,425 per ton of the import cost, significantly up from $560 per ton at the year's start.

Beyond tariffs, tight global supplies and falling U.S. aluminium stocks are exacerbating the premium surge. Market participants hold a "strong conviction" that these tariffs, especially after failed trade negotiations with Canada, will be permanent, impacting the 70% of U.S. imports that historically came from Canada. This structural shift is compounded by intense competition for sourcing, partly due to China's 45 million-ton production cap.

Analyst Tom Price from Panmure Liberum projects a significant 1.8 million-ton global aluminium market deficit this year. This deficit is attributed to a 900,000-ton annual reduction in China's net exports of refined and semi-fabricated products, alongside a 1.1 million-ton annual decline in aluminium production outside China. Collectively, this represents a 2 million-ton reduction in global availability outside of China, signaling sustained upward price pressure.

Key Decisions for Investors

• Monitor input cost inflation for companies heavily reliant on U.S. aluminium imports, potentially impacting their profitability and competitive positioning
• Evaluate supply chain resilience and sourcing strategies for industrial and manufacturing sectors exposed to these elevated aluminium prices
• Consider the long-term structural impact of sustained high tariffs and global supply deficits on affected industries and adjust investment theses accordingly
• Explore opportunities in domestic aluminium production or alternative materials as a potential hedge against import cost volatility