US aluminium prices break away as tariffs collide with global supply strain

American buyers are now to pay a 68 per cent premium over the London Metal Exchange (LME) aluminium price to get physical metal. This is the result of Trump’s increasing import tariffs from 10 per cent to 25 per cent back in March and then ramping them up to 50 per cent in June.

The premium for physical delivery in the US Midwest is now traded at an additional USD 560 per metric tonne above the implied tariff cost, indicating a total aluminium price increasing more than USD 5,000 per tonne.

The country is now grappling with a shortage of a metal necessary for various industries, from automotive and aerospace to construction and packaging. Although on paper, the needed supply should flow in due to the record-high premium for US delivery, but the reality is rather challenging.

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Declining imports? stocks? or both?

The tariffs were designed to enhance the US primary aluminium production, which, however, left the country with just four smelters still in operation. So far, the most noticeable effect has been Century Aluminum bringing back its Mt. Holly plant in South Carolina, which is now active with 50 thousand tonnes of previously idle capacity. It further plans to increase to full capacity by June.

Moreover, there are a few nethe short span of time between the tariff hikes, the US primary aluminium stocks are now limited to any preemptive stockpiling, causing domestic inventories to drop from 750 thousand tonnes at the beginning of 2025 to under 300,000 tonnes, according to Harbour Aluminiumw projects underway but are still years away from actually producing any metal, even if they manage to secure long-term power supplies against competition from Big Tech.

Presently, the US is still heavily dependent on aluminium imports, which have declined by 14 per cent in the first ten months of 2025 compared to 2024. Canada, which has traditionally been the largest supplier to the US, has started redirecting shipments, as reported by the World Bureau of Metal Statistics, to Europe around May 2025, sending 225 thousand tonnes to the Netherlands, 89 thousand tonnes to Italy and 29 thousand tonnes to Poland between May and October.

Due to the short span of time between the tariff hikes, the US primary aluminium stocks are now limited to any preemptive stockpiling, causing domestic inventories, according to Harbour Aluminium and Wittsend Commodity Advisors, to drop from 750 thousand tonnes at the beginning of 2025 to under 300 thousand tonnes. The high US premium is now signalling an urgent boost to its aluminium supply.

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Europe's shortage is nudging further

Besides the tariff, another hurdle for the US aluminium buyers is that Europe is also facing a similar shortage of aluminium. European duty-paid premiums have surged from USD 200 per tonne over London Metal Exchange (LME) cash in June to over USD 340 per tonne now. Due to this, the region is now facing challenges with supply issues.

South32's deactivation of the Mozal aluminium smelter in Mozambique due to soaring power prices has taken a significant supplier out of the European market. At the same time, another major player, the Grundartangi smelter in Iceland, owned by Century Aluminum, slashed its output by two-thirds in late October due to equipment failures and is expected to take around 11 to 12 months to get back on track.

The cherry on top, imports of Russian aluminium will be at a halt this year as part of the European Union’s 16th sanctions package, following a one-year grace period for buyers that ends next month.

The rising premiums in the region are also due to Europe’s new Carbon Border Adjustment Mechanism (CBAM), which just kicked in the first month of 2026, increasing the costs for higher-carbon imports.

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A further cap on the supply

Previously, traders could tap into LME stocks and send materials over to the US to take advantage of rising premiums. In the past, traders often tapped. However, due to LME registered inventories is held 58 per cent by Russian metal, the arbitrage opportunity is now limited. Moreover, the metals can’t be imported to the US because of sanctions.

Additionally, LME warehouses, compared to previous years, hold less aluminium, especially at a time when the global market is in pursuit of oversupply. 2025 closed, total LME inventories, which included both registered stocks and off-warrant holdings, stood at 669 thousand tonnes, a drop of 331 thousand tonnes since the beginning of the year. This decline highlights the major changes happening in the global aluminium market.

China, being the largest producer in the world, is now in adherence to a 45 million tonne cap, indicating it is close to peak production. Over the years, China's production growth slowed from 4 per cent in 2024 to just 2 per cent in 2025, as reported by the International Aluminium Institute.

Even with this slowdown, smelter margins were profitable, while aluminium prices have gone up and alumina prices are rising sharply. Additionally, China is ramping up its imports of primary aluminium, with inbound shipments rising by 19 per cent year-on-year in the first eleven months of 2025.

Majorly, the imports are coming from Russia, which has shifted its exports away from Western markets due to sanctions. On the other hand, China's exports of semi-fabricated products dropped by 11 per cent during the same timeframe, mainly due to the export tax rebates being removed in December 2024.

Also read: LME aluminium contract crosses $3000/t as supply deficit deepens with China’s 45-MT cap, smelter cuts, and US tariffs

The global aluminium market is tightening and this trend is being further complicated by the increasing fragmentation of regional pricing.

For the time to come

Currently, tariff is no longer the sole reason behind the aluminium supply shortage, but the various factors within the physical aluminium market are pushing the shortage in supply everywhere.

Nonetheless, this indicates that high aluminium prices in the US may remain longer than expected, making it challenging for consumers. Trump’s decision to extend 50 per cent tariffs to a wide range of aluminium products back in August has helped midstream processors, but it’s also speeding up the transfer of those higher primary metal costs to the final buyers. If import volumes don’t bounce back soon, US consumers could be in for a serious price shock.

To know more about the global primary aluminium industry 2026 outlook, book the report “Global ALuminium Industry Outlook 2026".