The US Midwest premium for P1020 aluminum, the bellwether used to price primary and scrap forms of the light metal, may set increasingly higher records following US president Donald Trump's decision to hike tariffs on aluminum imports to 50pc.
Trump on Tuesday signed an executive order that doubles Section 232 tariffs on aluminum and steel to 50pc, following through with plans that he first announced on 30 May. That move comes after he initially raised the protectionist duties to 25pc from 10pc on 12 March, while also stripping away special adjustments for Canada, Mexico and a handful of other countries.
Argus' weekly P1020 Midwest premium rose by as much as 18¢/lb in the wake of Trump first touting 25pc tariffs on Canada — which he later walked back — peaking at a record 42.38¢/lb in early March and eclipsing the previous record of 40¢/lb set back in the Civid-19 pandemic era.
Since then, the Midwest premium has retreated, last being assessed at 38¢/lb prior to the 50pc tariff announcement. Still, that level represents a 58pc increase over where the price was in late January before Trump began rolling out tariffs on most trading partners.
Domestic mills and scrap merchants anticipate that the Midwest premium will continue to surge in the coming weeks, which already has been reflected in offers and the futures markets as some suppliers began pricing in tariff-related costs at the start of the week.
Some sources told Argus the Midwest premium could rise as high as 65-70¢/lb, while others were more reserved with their estimates, saying they would expect an increase to between 55-60¢/lb. Argus has heard of an offer as high as 60¢/lb this week, but against minimal buying interest because of the uncertainty.
Regardless, all who were surveyed foresee the price setting fresh records daily on its march up, as the market enters uncharted territory.
Expectations for a higher premium further have been underpinned by other indexed-reference premiums moving up by 15¢/lb over the past two days, while futures contracts at the start of the week were signaling the premium would rise through July to 60.5¢/lb before beginning to give up gains.
The full impact from Trump's tariff hike on US aluminum markets has yet to be realized, but at least one mill expressed concern that any further cost pressures may constrict downstream demand for aluminum products. Scrap merchants foresee buying spreads widening but were split on by how much they may expand.
The US remains heavily dependent on imports of primary aluminum, with industry group Aluminum Association saying that domestic smelting capacity of primes is not enough to cover consumption — leaving a shortfall of 4mn metric tonnes (t) that must be sourced from other countries, primarily Canada.
