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Aluminum prices are holding above $3,100 per tonne on the London Metal Exchange despite reports that the Trump administration may roll back some of its 50% import tariffs, as a collision of record US delivery premiums, collapsing domestic inventories and a $12 billion federal stockpiling programme creates what analysts describe as a multi-year structural deficit — drawing investors into the sector even as Washington signals possible relief.
The Price Squeeze
The all-in cost of aluminum delivered in the US Midwest has surpassed $5,000 per tonne, combining the LME benchmark with a record delivery premium of roughly $560 per tonne. That premium alone exceeds what the total price of aluminum was just three years ago. US buyers are now paying 68% above the global benchmark to secure physical metal, according to Reuters — a spread driven by tariffs and acute domestic scarcity rather than global demand strength.
President Trump raised aluminum import duties from 10% to 25% in March 2025 and doubled them to 50% in June, later extending tariffs to over 400 derivative products including cans, cutlery and car parts. The Financial Times reported last week that the White House is reviewing the product lists and may exempt some items ahead of November’s midterm elections, but Treasury Secretary Scott Bessent downplayed any broad rollback. The LME price dipped 2.7% on the news before recovering above $3,000.
Inventories Collapsing
The tariffs were designed to revive domestic smelting, but in the short term they have drained available supply. US aluminum inventories have fallen from approximately 750,000 tonnes at the start of 2025 to below 300,000 tonnes, according to estimates from Harbor Aluminum and Wittsend Commodity Advisors. Canada, historically the largest supplier to the US market, sharply reduced discretionary shipments after the June tariff hike made exports unprofitable at prevailing premiums.
Europe faces its own squeeze. South32’s decision to mothball the Mozal smelter in Mozambique removed a key source of European supply, while Century Aluminum’s Grundartangi smelter in Iceland cut output by two-thirds following equipment failure in late October. European duty-paid premiums have surged from under $200 per tonne over LME cash in June to above $340 — meaning global buyers are competing for shrinking supply on both sides of the Atlantic.
Project Vault Changes the Game
Adding a new demand layer, the federal government launched Project Vault, a $12 billion programme to build a Strategic Critical Minerals Reserve that includes active aluminum purchasing. The initiative has put a floor under prices that tariff rollback rumours alone cannot break. Analysts at FinancialContent note that if government buying continues through spring, aluminum could test $3,300 on the LME regardless of any tariff adjustments.
The programme reflects a broader shift in how Washington views industrial metals as national security assets rather than freely traded commodities — a posture that structurally tightens supply by removing material from commercial circulation.
First New US Smelter in 45 Years
The supply response that tariffs were meant to trigger is finally materialising, though on a timeline measured in years rather than months. Century Aluminum and Emirates Global Aluminium announced plans for a 750,000-tonne-per-year greenfield smelter in Inola, Oklahoma — the first new primary aluminum smelter built in the United States in over four decades. The $4 billion facility will be powered by a previously uncompleted nuclear plant, with construction starting by late 2026 and production expected by the end of the decade.
Separately, Rio Tinto committed $1.1 billion to expand its AP60 smelter in Canada and entered a joint venture with China’s Chalco to acquire Brazil’s CBA, positioning the mining giant across multiple supply jurisdictions as trade barriers fragment the global aluminum market.
Where Investors Are Looking
The investment case varies sharply by company positioning. Century Aluminum (CENX) has shifted from a pure tariff beneficiary to a domestic energy play through the Oklahoma smelter partnership. Norsk Hydro benefits from hydro-powered Norwegian smelters exempt from the EU’s Carbon Border Adjustment Mechanism, though its downstream extrusion margins are under pressure from high input costs. Kaiser Aluminum (KALU) serves aerospace and automotive customers with specialty products manufactured entirely in the US and Canada, insulating it from cross-border tariff exposure. Rio Tinto (RIO) offers diversified metals exposure with integrated aluminum operations spanning four bauxite mines, four refineries and fourteen smelters globally.
Seeking Alpha’s January analysis highlighted that with LME prices above $3,000, declining global inventories and structural demand from defence, construction and renewables, the aluminum outlook for 2026 remains positive — though risks include a global economic slowdown or a reversal of Chinese supply discipline that could flood the market.
The Carbon Wall
Beyond tariffs, the EU’s CBAM is building a permanent cost differential between high-carbon and low-carbon aluminum. Uncertainty over future carbon costs is preventing long-term supply contracts from being signed in Europe, further tightening the spot market. For producers with clean energy credentials — hydro, nuclear, or renewable-powered smelters — the emerging “green premium” represents a durable competitive advantage that outlasts any single tariff cycle. The era of cheap, globally fungible aluminum appears to be ending, replaced by a fragmented market where physical location, carbon intensity and government policy determine the real price.
Sources: Benzinga
