Alcoa, the Pittsburgh-based aluminium giant, is preparing to absorb up to USD 90 million costs this quarter (Q2) as a result of tariff impact. Yes, you read that correctly! Despite being a US-headquartered aluminium manufacturer, the company is preparing for the financial hit from these tariffs. And it doesn’t end there. Alcoa is expecting this steep cost after posting a strong performance in Q1, with a double net income of USD 548 million.
The truth is Alcoa has already experienced a cost of USD 20 million since the tariff being implemented by the US government. Why? Because Alcoa’s 70 per cent of the aluminium production takes place in Canada, which is now subject to Donald Trump’s 25 per cent import duty.
Alcoa’s CEO William Oplinger analysed that this quarterly cost equates to an annual hit of approximately $400 to $425 million. Let alone the financial cost, Alcoa also bore a 1 per cent drop in product during the first quarter of 2025. However, amid all this, Oplinger still remains cautiously optimistic, believing that an increased Midwest premium would help offset much of the cost pressure in support of Alcoa’s domestic smelters.
The impact could have been bigger and higher if an additional 25 per cent tariff on Canadian-origin aluminium would have had imposed under the US International Emergency Economic Powers Act (IEEPA), effective from March 4, 2025. As such, the imports would have been subject to a combined 50 per cent tariff. However, exemptions effective from March 7, led to the scrapping of this additional levy.
Alcoa also anticipates the steep US tariff on China will drive up its annual costs by USD 10 to 15 million, as the former relies on the latter for some input materials and has yet to find viable alternatives.
As the pressure mounts, the question arises—is there a viable solution to this aluminium supply crunch, and if so, how realistic is it? According to Mr Oplinger, the core issue lies in the lack of domestic smelting capacity in the United States. Speaking at the Aluminum Association Spring Meeting Press Roundtable on April 24, he revealed a stark reality: the US faces an annual aluminium deficit of around 4 million tonnes. Even if all idled smelting capacity is brought into operation, there would still be a 3.6 million tonnes capacity shortfall a year. So, what’s the way forward? To meet current demand, the US would need to build five to six new aluminium smelters. But there's a catch. Each smelter would take about five years to construct. And it’s not just about infrastructure. Operating these facilities would require a massive increase in energy capacity, equivalent to seven new nuclear reactors or more than ten Hoover Dams.
Raw material supply could also be a matter of concern, especially in the background when America’s only operating alumina refinery Atlantic Alumina, or Atalco, is facing an existential threat. The plant, which provides nearly 40 per cent of the nation’s alumina, a crucial input for aluminium production, is fighting for survival, with the fate of over 550 workers hanging in the balance. The refinery depends on imported bauxite, primarily from Jamaica. With tariffs and trade restrictions in place, the cost of raw materials has soared. For a facility already operating on tight margins, this has meant mounting financial strain and unpredictable supply.
Staying optimistic, Oplinger stated: “Building on our experience, we will continue our engagement efforts with the US government and policymakers to advocate for the best outcome possible.”
Tariff impact or US dependence on Canadian aluminium — Or Both?
It’s becoming increasingly clear that the current situation reflects both the impact of tariffs and the United States’ deep dependence on Canadian aluminium. In 2024, Canada exported 3.6 million tonnes of aluminium (including semi-finished products) in a year to the United States, which accounted for 65 per cent of the United States total imports of 5.52 million tonnes. Interestingly, 3.6 million tonnes is also the exact volume the US could produce annually if all its idled smelters were brought back into operation. But until that potential is realised, or alternative sources of supply are secured, it is fair to say that the US remains heavily reliant on Canadian aluminium.
Addressing the second concern, it was long before analysed that US tariffs on aluminium imports would primarily hurt US businesses and consumers by raising the cost of aluminium-dependent products, making them less competitive globally. Not only inflation, recession was also in forecast. At the end of February, before the tariff even came into effect, Alcoa itself had warned a job loss of over 100,000 employees. Mr Oplinger himself conveyed at the BMO Global Metals and Mining Conference in Florida that the tariff implementation could lead to a massive loss of about 20,000 employments in the US aluminium industry and a further 80,000 jobs across the value-chain sectors that support it. Within a month, Alcoa’s prediction started turning true, with hundreds of job cuts in Canada due to US tariffs targeting aluminium and steel. The United Steelworkers union, which represents more than 225,000 members in Canada, had then cautioned that these job losses were merely the initial indicators of more profound economic consequences.
