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 isn’t in play here, this one is being levied under a Section 232 national security order.

Unless Trump has another “TACO” moment and walks this back, aluminum is effectively being swept up in the political theater surrounding last week’s US Steel visit.

The U.S. imports nearly 𝟱 𝗺𝗶𝗹𝗹𝗶𝗼𝗻 𝗺𝗲𝘁𝗿𝗶𝗰 𝘁𝗼𝗻𝘀 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 doesn’t have the smelting capacity to meet demand.

Premiums for delivered, duty-paid aluminum are already around $𝟵𝟬𝟬/𝗺𝘁 due to the existing 25% tariff. If these new tariffs take hold, the premium could spike to $𝟭,𝟱𝟬𝟬/𝗺𝘁. 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 that’s potentially $𝟭,𝟮𝟬𝟬/𝗺𝘁 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?
▪️ A 1¢ increase per beer/soda can
▪️ 3–5¢ more per foil tray or takeout container
▪️ Up to $20 more per aluminum-heavy auto part
𝗔𝗻𝗻𝘂𝗮𝗹 𝗶𝗺𝗽𝗮𝗰𝘁: ~$𝟮.𝟮 𝗯𝗶𝗹𝗹𝗶𝗼𝗻 𝗮𝗱𝗱𝗶𝘁𝗶𝗼𝗻𝗮𝗹 𝗰𝗼𝘀𝘁 𝘁𝗼 𝘁𝗵𝗲 𝗨.𝗦. 𝗲𝗰𝗼𝗻𝗼𝗺𝘆

That’s about $16.67 per household, just in direct aluminum-related costs. For an administration intent on fighting inflation, I’m not sure this is the right approach.

This tariff isn’t reducing global supply or increasing demand, it’s just reshuffling trade flows. Material that would’ve gone to the U.S. may be re-routed elsewhere, but the overall market balance remains unchanged. That’s 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.

𝗡𝗼𝘄 𝗺𝗼𝗿𝗲 𝘁𝗵𝗮𝗻 𝗲𝘃𝗲𝗿, 𝗺𝗮𝗻𝗮𝗴𝗶𝗻𝗴 𝗲𝘅𝗽𝗼𝘀𝘂𝗿𝗲 𝘁𝗼 𝘁𝗵𝗲 𝗨.𝗦. 𝗮𝗹𝘂𝗺𝗶𝗻𝘂𝗺 𝗽𝗿𝗲𝗺𝗶𝘂𝗺 𝗶𝘀 𝗰𝗿𝗶𝘁𝗶𝗰𝗮𝗹.

Perfectly Hedged LLC provides the tools, training, and insight to help teams manage this risk effectively. Whether you’re hedging contracts, managing procurement, or trading CME premium swaps we’ll show you how to navigate it. Send a message to samuel.basi@perfectlyhedged.com to discuss.