50% aluminum tariffs & the mid-west premium
From Wednesday, June 4th, all aluminum imported into the U.S. will face a 50% import duty. At current prices, that equates to an extra ~$1,200/mt in landed cost. The legality of unilateral tariffs isnโt in play here, this one is being levied under a Section 232 national security order.
Unless Trump has another โTACOโ moment and walks this back, aluminum is effectively being swept up in the political theater surrounding last weekโs US Steel visit.
The U.S. imports nearly ๐ฑ ๐บ๐ถ๐น๐น๐ถ๐ผ๐ป ๐บ๐ฒ๐๐ฟ๐ถ๐ฐ ๐๐ผ๐ป๐ of refined aluminum annually. Roughly two-thirds comes from Canada and Mexico, with the rest from countries like China, UAE, India, and Bahrain. The U.S. simply doesnโt have the smelting capacity to meet demand.
Premiums for delivered, duty-paid aluminum are already around $๐ต๐ฌ๐ฌ/๐บ๐ due to the existing 25% tariff. If these new tariffs take hold, the premium could spike to $๐ญ,๐ฑ๐ฌ๐ฌ/๐บ๐. Since most domestic contracts are indexed to the Platts Midwest Premium, this cost increase gets passed straight through to the buyer.
For domestic producers not subject to tariffs, this is a windfall, selling aluminum at a premium thatโs potentially $๐ญ,๐ฎ๐ฌ๐ฌ/๐บ๐ above zero-tariff levels. Those who were long physical metal or CME premium swaps are celebrating.
Those short? Likely reaching for the headache pills.
But what about the consumer?
โช๏ธ A 1ยข increase per beer/soda can
โช๏ธ 3โ5ยข more per foil tray or takeout container
โช๏ธ Up to $20 more per aluminum-heavy auto part
๐๐ป๐ป๐๐ฎ๐น ๐ถ๐บ๐ฝ๐ฎ๐ฐ๐: ~$๐ฎ.๐ฎ ๐ฏ๐ถ๐น๐น๐ถ๐ผ๐ป ๐ฎ๐ฑ๐ฑ๐ถ๐๐ถ๐ผ๐ป๐ฎ๐น ๐ฐ๐ผ๐๐ ๐๐ผ ๐๐ต๐ฒ ๐จ.๐ฆ. ๐ฒ๐ฐ๐ผ๐ป๐ผ๐บ๐
Thatโs about $16.67 per household, just in direct aluminum-related costs. For an administration intent on fighting inflation, Iโm not sure this is the right approach.
This tariff isnโt reducing global supply or increasing demand, itโs just reshuffling trade flows. Material that wouldโve gone to the U.S. may be re-routed elsewhere, but the overall market balance remains unchanged. Thatโs why this move is not fundamentally bullish for the global aluminum price, just inflationary for U.S. buyers. Though we may see some knee-jerk outright price trading in the short-term.
๐ก๐ผ๐ ๐บ๐ผ๐ฟ๐ฒ ๐๐ต๐ฎ๐ป ๐ฒ๐๐ฒ๐ฟ, ๐บ๐ฎ๐ป๐ฎ๐ด๐ถ๐ป๐ด ๐ฒ๐
๐ฝ๐ผ๐๐๐ฟ๐ฒ ๐๐ผ ๐๐ต๐ฒ ๐จ.๐ฆ. ๐ฎ๐น๐๐บ๐ถ๐ป๐๐บ ๐ฝ๐ฟ๐ฒ๐บ๐ถ๐๐บ ๐ถ๐ ๐ฐ๐ฟ๐ถ๐๐ถ๐ฐ๐ฎ๐น.
Perfectly Hedged LLC provides the tools, training, and insight to help teams manage this risk effectively. Whether youโre hedging contracts, managing procurement, or trading CME premium swaps weโll show you how to navigate it. Send a message to samuel.basi@perfectlyhedged.com to discuss.