Aluminum premium slips as U.S. set to cut tariffs on Canada metal

A key regional price benchmark for aluminum delivered to the U.S. market tumbled after the Trump administration indicated it would lower tariffs on certain Canadian exports of aluminum.

The September U.S. Midwest premium slumped 8.2 per cent to 95 cents U.S. a pound on Thursday, according to pricing data from Platts. The October and November contracts dropped more than 12 per cent after the tariff announcement, the data showed. The Midwest premium is the amount added to global benchmarks to deliver aluminum to that region.

Canada accounts for more than half of imports, according to data from USGS. Tariffs on some Canadian products could drop to 25 per cent from 50 per cent if the two countries reach a trade deal.

The Midwest premium — also a proxy for the amount of money U.S. manufacturers pay to make products such as appliances, beverage cans and automobiles — has climbed sharply higher to successive record highs since U.S. President Donald Trump ’s punitive 50 per cent tariff took effect in June last year. Another supply shock stemming from the Iran War helped boost the regional aluminum premium by nearly 100 per cent.

Morgan Stanley analysts led by Amy Gower said in a Thursday note that Canada has redirected more metal to Europe since U.S. tariffs were introduced.

The potential cut of tariffs on Canadian aluminum to 25 per cent would encourage more flows to the U.S. instead of Europe, but Canada still couldn’t meet all U.S. demand. The U.S. would therefore need additional imports subject to the 50 per cent tariff, limiting the potential decline in the Midwest premium, they said.

Details of the tentative deal between the U.S. and Canada have yet to be finalized and are not expected to apply across the board. For aluminum and steel, different rates could apply to some derivative products that include those metals, Bloomberg reported, citing people familiar with the matter who requested anonymity to discuss the tentative terms of the agreement.