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 isnโ€™t in play here, this one is being levied under a Section 232 national security order.

Unless Trump has another โ€œTACOโ€ moment and walks this back, aluminum is effectively being swept up in the political theater surrounding last weekโ€™s US Steel visit.

The U.S. imports nearly ๐Ÿฑ ๐—บ๐—ถ๐—น๐—น๐—ถ๐—ผ๐—ป ๐—บ๐—ฒ๐˜๐—ฟ๐—ถ๐—ฐ ๐˜๐—ผ๐—ป๐˜€ 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 doesnโ€™t have the smelting capacity to meet demand.

Premiums for delivered, duty-paid aluminum are already around $๐Ÿต๐Ÿฌ๐Ÿฌ/๐—บ๐˜ due to the existing 25% tariff. If these new tariffs take hold, the premium could spike to $๐Ÿญ,๐Ÿฑ๐Ÿฌ๐Ÿฌ/๐—บ๐˜. 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 thatโ€™s potentially $๐Ÿญ,๐Ÿฎ๐Ÿฌ๐Ÿฌ/๐—บ๐˜ 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?
โ–ช๏ธ A 1ยข increase per beer/soda can
โ–ช๏ธ 3โ€“5ยข more per foil tray or takeout container
โ–ช๏ธ Up to $20 more per aluminum-heavy auto part
๐—”๐—ป๐—ป๐˜‚๐—ฎ๐—น ๐—ถ๐—บ๐—ฝ๐—ฎ๐—ฐ๐˜: ~$๐Ÿฎ.๐Ÿฎ ๐—ฏ๐—ถ๐—น๐—น๐—ถ๐—ผ๐—ป ๐—ฎ๐—ฑ๐—ฑ๐—ถ๐˜๐—ถ๐—ผ๐—ป๐—ฎ๐—น ๐—ฐ๐—ผ๐˜€๐˜ ๐˜๐—ผ ๐˜๐—ต๐—ฒ ๐—จ.๐—ฆ. ๐—ฒ๐—ฐ๐—ผ๐—ป๐—ผ๐—บ๐˜†

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

This tariff isnโ€™t reducing global supply or increasing demand, itโ€™s just reshuffling trade flows. Material that wouldโ€™ve gone to the U.S. may be re-routed elsewhere, but the overall market balance remains unchanged. Thatโ€™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.

๐—ก๐—ผ๐˜„ ๐—บ๐—ผ๐—ฟ๐—ฒ ๐˜๐—ต๐—ฎ๐—ป ๐—ฒ๐˜ƒ๐—ฒ๐—ฟ, ๐—บ๐—ฎ๐—ป๐—ฎ๐—ด๐—ถ๐—ป๐—ด ๐—ฒ๐˜…๐—ฝ๐—ผ๐˜€๐˜‚๐—ฟ๐—ฒ ๐˜๐—ผ ๐˜๐—ต๐—ฒ ๐—จ.๐—ฆ. ๐—ฎ๐—น๐˜‚๐—บ๐—ถ๐—ป๐˜‚๐—บ ๐—ฝ๐—ฟ๐—ฒ๐—บ๐—ถ๐˜‚๐—บ ๐—ถ๐˜€ ๐—ฐ๐—ฟ๐—ถ๐˜๐—ถ๐—ฐ๐—ฎ๐—น.

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

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