U.S. Aluminum Prices Hit Record High Amid Tariffs
U.S. aluminum prices surged to an unprecedented level on Monday, primarily due to a significant tightening of domestic inventories caused by the steel and aluminum tariffs imposed by the Trump administration. These tariffs are intended to bolster the U.S. industrial base.
According to reports, the overall aluminum prices in the U.S., which combine figures from the London Metal Exchange and local delivery premiums, reached an all-time high of $4,816 per tonne. This marks a nearly twofold increase from the lows seen in December 2023.
The U.S. remains largely reliant on aluminum imports, lacking sufficient domestic production capacity to satisfy local demand. Notably, shipments from Canada, the largest supplier, have significantly declined since tariffs were enforced in March and then raised to 50% in June.
Analysts from Morgan Stanley, led by Amy Gower, noted that U.S. aluminum imports averaged around 64,000 tonnes monthly from April through July, which is lower than desired for 2024. This drop was slightly offset by an 18,000-tonne increase in scrap imports.
Gower highlighted that U.S. aluminum inventories are decreasing by approximately 46,000 tonnes each month, largely influenced by tariff uncertainties related to the U.S.-Canada trade situation. She mentioned, “However, inventory reductions probably cannot continue indefinitely, and the recent rise in Midwest premiums suggests that some buying may be returning.”
Jeffrey Kessler, the deputy secretary for industry and security at the Commerce Department, commented that the steel and aluminum tariffs will eliminate loopholes and aid in the ongoing revitalization of the domestic steel and aluminum industry. This statement followed the announcement of 50% tariffs on an additional 407 items this summer.
Additionally, aluminum prices increased by 0.3% to $2,878 per tonne on the London Metal Exchange, following a three-year high reached the previous week.
Across the ocean, the Shanghai Futures Exchange reported that open interest in aluminum contracts hit a new high of 745,000 lots. Futures prices are peaking, reflecting supply constraints and growing demand.
Analyst Matti Zhao from BofA Securities suggested that Chinese aluminum stocks are currently undervalued, as the construction of data centers and AI equipment drives the need for aluminum. At the same time, Gao Ying, an analyst at Shuohe Asset Management, mentioned that some long-term investments have shifted from Chinese stocks toward aluminum futures, which could lead to rising prices.
Returning to the U.S., it’s worth considering how these increasing industrial metal prices could contribute to inflationary pressures.
