Trump tariff may push aluminium buyers towards Mideast, India
WASHINGTON, February 9, 2025
The metal companies in the United States and those importing metals for their product manufacturing are likely to turn to the Middle East and India for aluminium supplies as they seek to bypass the extensive tariffs imposed by President Donald Trump, reported Reuters citing industry sources.
Trump's planned tariffs - 25% on imports from Mexico and most Canadian goods, along with 10% on Chinese goods - lack precise details but are set to take effect on Tuesday, rattling markets.
Aluminium is crucial for the transport, packaging and construction industries. According to data from the US Commerce Department, the US imported multi-million tonnes of aluminium products in 2023.
Analysts note that US consumers rely on Canadian aluminium producers like Alcoa and Rio Tinto for over half of their imported supply, prompting concerns about finding alternative sources.
US imports from alternative key sources including Peru and Chile for copper and silver, and Switzerland for gold, Citi analysts wrote in a note.
Combined, Canada and Mexico represent around half of US domestic silver consumption and around 10% of US copper consumption, equivalent to some 147,000 metric tons of copper, it added.
Glyn Lawcock, an analyst at Barrenjoey, a Sydney-based investment bank, said: "Canada will divert some aluminium from (going to) the US to other regions, so for the US to encourage aluminium from other regions, they are going to have to pay a bit more."
This will be reflected in physical premiums, encompassing costs like handling and shipping. These premiums are paid in addition to exchange prices to secure the delivery of physical metal, stated Lawcock.
Primary aluminium prices in the US are determined by the London Metal Exchange benchmark, supplemented by the Midwest premium.
William Oplinger, the CEO of one of the top US aluminium producers Alcoa said on an earnings call last month that the company could reroute its Canadian material to Europe, said the Reuters report.
He also anticipated increased aluminium imports from the Middle East and potentially India into the US market. The UAE and Bahrain are significant aluminium producers in the region.
Sources at two aluminium producers said they were waiting and monitoring Trump's announcements, with one adding they had "no intention to change yet".
However, a legal advisor recommended that clients exercise caution if the tariffs are lifted and advised them to prepare for the possibility of selling in markets outside the US if Trump extends the tariffs to additional regions.
Across other metals, redirection of trade flows could soften the impact of the tariffs, with greater US imports from alternative key sources including Peru and Chile for copper and silver, and Switzerland for gold, Citi analysts wrote in a note.
