Alcoa CFO: US Aluminum Premium to Remain Elevated Despite Potential Canada Tariff Cut

The premium paid for physical aluminum in the United States is expected to remain high even if Washington halves the import tariff on Canadian metal, Alcoa’s Chief Financial Officer Molly Beerman said on Thursday.

Speaking at the Jefferies Global Industrials Conference, Beerman explained that a fundamental supply deficit will continue to support elevated prices for U.S. consumers.

Structural Supply Shortfall

The core of the issue is a structural imbalance in the domestic market. According to Beerman, the U.S. needs to import approximately 4 million tons of aluminum each year to meet demand. Canada, a primary supplier, can only provide about 3 million tons annually.

This leaves a 1 million ton gap that must be filled by imports from other regions. "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 stated. She added that while the premium might decrease slightly, it would not return to pre-tariff levels.

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Market Dynamics and Tariff Impact

The Midwest premium is the additional cost that U.S. buyers pay on top of the global benchmark price set by the London Metal Exchange (LME). It currently stands at $1.09 per pound ($2,403 per metric ton), down from a record high of $1.19 per pound in June.

The recent decline in the premium has been driven by market expectations that the current 50% import tariff on Canadian aluminum could be reduced to 25%. However, Beerman noted that a significant price drop would only occur if tariff relief or waivers were extended to other trading partners, such as Japan, South Korea, or European nations, to cover the remaining 1 million ton shortfall. Such a move would "essentially wipe out the tariff benefit" that currently supports the high premium, she said.