Alcoa's chief financial officer, Murray Billman, stated that even if Canada's primary aluminum receives a preferential tax rate, the aluminum premium in the Midwest of the United States would only "slightly decrease" at most, and it is unlikely to return to the level before the implementation of the tariffs.
The trade negotiations between the United States and Canada reached an agreement in late August, proposing to reduce the 50% US tariffs on Canadian aluminum to 25%. However, the negotiations ultimately broke down on August 21st, and triggered retaliatory tariffs from both sides in the metal and other commodity sectors.
Currently, the aluminum premium in the Midwest of the United States remains at a historically high level. On September 10th, the trading premium of 99.7% P1020 aluminum in the United States was $1.097 per pound, plus the LME spot price, and it has already increased more than four times compared to the beginning of 2025. High tariffs are one of the main factors driving the premium, and the global supply risk caused by the Middle East war has further amplified the market premium.
Alcoa believes that the key issue lies in the structural supply gap in the United States. The United States needs to import approximately 4 million tons of primary aluminum annually, while Canada can only provide about 3 million tons at most. Therefore, even if Canada's tariffs decrease, there is still a 1 million-ton gap that needs to be imported from other countries by the United States.
If the United States simultaneously grants tariff reductions or exemptions to more trading partners, and the remaining 1 million tons of supply can be supplemented, then the premium in the Midwest could show a more significant decline. Canada accounts for 60.5% of the United States' primary aluminum imports in 2025, and its supply position is unlikely to be completely replaced in the short term.
Meanwhile, the demand for aluminum products in the United States and Europe remains strong. Alcoa stated that the packaging industry has strong demand, and a large amount of sheet supply in both regions has already flowed to packaging customers; the construction of power infrastructure also drives the demand for aluminum rods, and the company's aluminum rod orders have all been sold out.
The only significantly weak market in Europe is the aluminum billet market, mainly affected by the Middle East war. High aluminum prices also stimulate producers to restore some idle production capacity, and Alcoa restarted about 30,000 tons of smelting capacity in the second quarter and increased production at some smelting plants in Spain, Brazil, Norway, and Australia.
Therefore, whether the premium in the Midwest can truly fall in the future depends not only on the tariffs of Canada but also on whether the United States can obtain stable import supplies from more countries.
