US companies will seek more aluminum in the Middle East and India, and copper in Chile and Peru, in an attempt to circumvent the broad tariffs imposed by US President Donald Trump, according to industry sources.
Trump's orders to impose additional tariffs of 25% on imports from Mexico and most goods from Canada, as well as 10% on goods from China, have not provided many details, but are scheduled to take effect on Tuesday and have shaken markets.
US users rely on Canadian aluminum producers such as Alcoa and Rio Tinto for more than half of their imported needs and will seek alternative supplies, analysts said.
Important to the transportation, packaging, and construction sectors, the US imported 5.46 million metric tons of aluminum products in 2023, according to data from the US Department of Commerce. Canada accounted for 3.08 million tons, or 56% of that amount, the data showed.
“Canada will divert some of the aluminum going from the US to other regions, so for the US to incentivize aluminum from other regions, it will have to pay a little more,” said analyst Glyn Lawcock of Sydney-based investment bank Barrenjoey. This will be reflected in physical premiums, which include costs such as handling and shipping, and are paid in addition to exchange prices to receive delivery of the physical metal.
The imposition of tariffs represents a “significant upside risk to the US Midwest premium this year,” ING analysts wrote in a note.
Primary aluminum prices in the US are based on the London Metal Exchange benchmark plus the Midwest premium, which rose to 2.95 US cents per pound or $650 per metric ton on Friday. That reflects an increase of more than 10% since the beginning of the year and is the highest since July 2022.