U.S. spot aluminium premium hit a record high due to Trump’s tariff policy and tight global aluminium supply.
Core Background and premium situation
① The U.S. spot aluminium price is composed of the LME benchmark price plus the premium, which covers costs such as freight and taxes.
② Since June, the premium for post-tax aluminium in the Midwestern United States has soared to 88.10 cents per pound (about $1,942 per tonne), and when combined with the LME benchmark price of $2,850 per tonne, the current total cost of spot aluminium in the United States is $4,792 per tonne.
The key reason for the premium surge
① Tariff increase: In June, the US raised tariffs on imported steel and aluminum from 25% to 50%, which amounts to $1,425 per ton based on current Lme aluminum prices, a significant increase from the beginning of the year.
② Trade expectations and inventory impact: The Trump administration’s termination of trade talks with Canada has led to market expectations that tariffs will be permanently in place with no exemptions from Canada, coupled with a decline in U.S. aluminum inventories, further pushing up the premium. Canada is the main source of U.S. aluminium imports, accounting for 70 percent (more than 2.7 million tons) of its total imports last year.
③ Tight global supply: Power shortages constrain aluminium production, China’s aluminium capacity approaches 45 million tons limit, and aluminium output outside China has been declining year by year, with an expected 1.8 million tons gap in the global aluminium market this year.
④ Constrained domestic capacity in the US: US electrolytic aluminum plants have to compete with tech companies for power resources, and tech giants pay electricity prices far above the $30 per megawatt-hour profit threshold for aluminum smelters, making it difficult for domestic capacity to expand.