Alcoa says Canada tariff cut alone won't bring US aluminium premium down

A cut in US tariffs on Canadian aluminium alone is unlikely to bring down the elevated Midwest aluminium premium significantly, according to Alcoa CFO Molly Beerman, as the US still relies on imports from other countries to cover a structural supply gap.

Speaking at the Jefferies Global Industrials Conference in New York, Beerman said the US needs to import around 4 million tonnes of aluminium a year, while Canadian suppliers can provide roughly 3 million tonnes. The remaining 1 million tonnes must come from other markets, where tariffs or other trade barriers continue to support higher delivered costs.

The Midwest premium, the surcharge US buyers pay above the London Metal Exchange aluminium price for physical metal, currently stands at USD 1.09 per pound (USD 2,403 per tonne). It has eased from a record USD 1.19 per pound in June amid expectations that the US could reduce its 50 per cent tariff on Canadian aluminium to 25 per cent.

But Beerman said a Canada-only tariff reduction would offer limited relief.

"With the U.S. still needing to incent the import of a million tons, even if we were to have a favorable rate with Canada, we don't see Midwest dropping significantly," Beerman said. "It might come off a little bit, but we wouldn't see it returning to pre-tariff levels", she added. 

Broader tariff relief could change the outlook

The premium could fall more substantially if Washington extends tariff relief to other major aluminium suppliers, according to Beerman.

Japan, South Korea and European countries could potentially provide the additional 1 million tonnes the US market needs. If those suppliers also received tariff relief or waivers, the competitive pressure on the Midwest premium would increase.

"Then you can expect the Midwest premium to reduce in response to essentially wipe out the tariff benefit," Beerman mentioned.

That distinction is important for US aluminium buyers because Canadian metal alone cannot satisfy the country's import requirement. Even with lower duties on Canadian supplies, the market would still need to attract tonnes from elsewhere.

Alcoa absorbs more than USD 1 billion in Canadian tariffs

Alcoa has significant exposure to the tariff regime. The company produces approximately 900,000 tonnes of aluminium annually in Canada and pays more than USD 1 billion in tariffs on the majority of that material shipped into the US.

However, the elevated Midwest premium has so far offset those costs and provided additional margin for the producer.

"However, the Midwest is fully compensating us for that, as well as returning as margin because of the tightness in tons," Beerman said.

Tight physical supply has also strengthened demand for Alcoa's aluminium. Beerman said supply from the Middle East has been constrained by the war, prompting customers in North America and Europe to actively seek available material.

Alcoa's order book is almost completely sold out for the remainder of 2026, she added.

US aluminium buyers remain exposed to tight supply

The persistence of the Midwest premium highlights the difficulty of reducing US aluminium costs through a single tariff adjustment. While Canada is the largest external source of aluminium for the US market, other suppliers are still needed to close the country's import gap.

For automakers, packaging producers, construction companies and other aluminium-consuming industries, that means input costs could remain elevated even if Washington lowers duties on Canadian metal.

For Alcoa, meanwhile, the current pricing environment provides a degree of protection against the cost of importing its Canadian production into the US. A broader reduction in tariffs across multiple supplying countries could change that dynamic by increasing competition for US buyers and putting downward pressure on the Midwest premium.