Aluminium: Midwest premium to stay elevated – ING

ING Commodities Strategist Ewa Manthey analyses US aluminium policy and market structure, highlighting that Washington’s amended Section 232 tariffs aim to incentivize domestic smelting but will not quickly resolve the supply shortfall. With US primary aluminium output in long‑term decline and new capacity years away, the US remains reliant on imports, keeping Midwest premiums well supported.

US tariffs and import reliance

"The Trump administration amended its Section 232 aluminium tariffs to encourage investment in domestic smelting. Companies that build, expand or refurbish US smelting capacity can apply to import qualifying volumes at a 25% tariff instead of the standard 50% rate, provided they meet approved investment milestones. The shift reflects the limited success of tariffs alone in reviving US primary aluminium production."

"US primary aluminium output has steadily eroded despite years of tariff protection. The country is down to just four operating smelters, compared with more than 20 at the start of the century, leaving the US overwhelmingly dependent on imported metal. Canada remains the dominant supplier, while producers in the Middle East have become increasingly important in meeting US demand."

"Rebuilding US smelting capacity won’t happen quickly. At its core, primary aluminium production hinges on abundant, competitively priced electricity, not tariff protection. Levies may help the math on paper, but new smelters still demand billions in capital, long‑term power contracts, environmental approvals and years of construction before any fresh metal hits the market."

"We expect the US Midwest premium to remain well-supported. While the new programme may improve the longer-term outlook for domestic production, it’s unlikely to materially reduce import dependence or procurement costs over the next several years."

"As a result, import dependence and elevated US delivery costs are likely to persist. Ultimately, the programme should be viewed as a long-term industrial policy rather than a near-term solution to the country’s supply shortfall. If successful, it could support a gradual revival of US primary aluminium production."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)