Trump’s tariffs drive US physical market aluminium premiums to record high

Price premiums for aluminium on the physical market in the United States have surged to a record high due to the looming threat of tariffs on imports of the metal used in the transport, construction and packaging industries.

U.S. President Donald Trump is planning to restore 25% tariffs on aluminium imports from March 12. Tariffs on most imports from Mexico and Canada took effect on Tuesday.

Buyers on the physical market usually pay the London Metal Exchange benchmark aluminium price plus a premium which typically covers taxes, transport and handling costs.

The U.S. Midwest duty-paid aluminium premium at above 40 U.S. cents a lb or nearly $900 a metric ton is up nearly 60% since the start of 2025. 

"Ultimately, the U.S. is a net importer of aluminium ... Producers will not want to pay the tariff, they will try to pass on as much as they can to consumers," said Bank of America analyst Michael Widmer.

"This leaves you with a market where aluminium units will potentially be diverted away from the United States."

Widmer said the premium may have to rise to near 47 cents a lb to fully account for a 25% levy.

U.S. aluminium import taxes will apply to Argentina, Australia, Canada, Mexico, European Union countries and the UK.

Canadian smelters account for the bulk of primary and alloyed aluminium exports to the United States, 70% of 3.92 million tons last year, according to information provider Trade Data Monitor.

"The US cannot produce all that aluminum, they don't have the capacity," said Eivind Kallevik, CEO at Norwegian aluminium producer Hydro in an interview after the company's fourth quarter results.

"If the U.S. is going to keep manufacturing cars and other products, they will need to attract the metal. That means higher premiums and costs."

The second largest exporter to the United States is Saudi Arabia, not included in the list so far, with an 11% share, according to Trade Data Monitor.

Analysts said aluminium produced in countries where import levies apply is likely to be diverted to Europe, where the duty-paid physical market premiums has dropped to 11-month lows at $240 a metric ton, down 35% since the start of 2025.