A key regional price benchmark for aluminum delivered to the US market tumbled after the Trump administration indicated it would lower tariffs on certain Canadian exports of aluminum.
The September US Midwest premium slumped 8.2% to 95 cents a pound on Thursday, according to pricing data from Platts. The October and November contracts dropped more than 12% after the tariff announcement, the data showed. The Midwest premium is the amount added to global benchmarks to deliver aluminum to that region.
Canada accounts for more than half of imports, according to data from USGS. Tariffs on some Canadian products could drop to 25% from 50% if the two countries reach a trade deal.
The Midwest premium — also a proxy for the amount of money US manufacturers pay to make products such as appliances, beverage cans and automobiles — has climbed sharply higher to successive record highs since President Donald Trump’s punitive 50% tariff took effect in June last year. Another supply shock stemming from the Iran War helped boost the regional aluminum premium by nearly 100%.
Morgan Stanley analysts led by Amy Gower said in a Thursday note that Canada has redirected more metal to Europe since US tariffs were introduced.
The potential cut of tariffs on Canadian aluminum to 25% would encourage more flows to the US instead of Europe, but Canada still couldn’t meet all US demand. The US would therefore need additional imports subject to the 50% tariff, limiting the potential decline in the Midwest premium, they said.
Details of the tentative deal between the US and Canada have yet to be finalized and are not expected to apply across the board. For aluminum and steel, different rates could apply to some derivative products that include those metals, Bloomberg reported, citing people familiar with the matter who requested anonymity to discuss the tentative terms of the agreement.
(By Yvonne Yue Li)
