CHICAGO – The American aluminium market is grappling with a widening price chasm as domestic premiums reach historic highs, driven by a combination of aggressive trade policies and a tightening global supply chain.1 As of January 9, 2026, the Midwest premium—the regional surcharge paid on top of the global benchmark to cover delivery, logistics, and duty—has spiralled to a record $2,100 per metric tonne (approximately 96 cents per lb).
This localized surge means US manufacturers are now paying significantly more for primary aluminum than their international competitors. While the London Metal Exchange (LME) three-month contract hovers near $3,100/mt, the total “all-in” transaction price for US buyers has effectively climbed above $5,200/mt, a staggering 40% increase since mid-2025.
The Catalyst: The 50% Tariff Threshold
The primary driver of this price escalation was the June 2025 decision to double Section 232 aluminum import tariffs to 50%.2 Intended to bolster domestic smelting capacity and reduce reliance on foreign metal, the policy has instead created an immediate “supply vacuum” in a country that produces less than 20% of its annual primary aluminum requirements.
- Import Dependency: The US requires over 4 million metric tonnes of aluminum annually but produces roughly 750,000 tonnes domestically.
- The Canadian Gap: While Canada remains the largest supplier, accounting for nearly 70% of shipments, discretionary exports from Canadian smelters have slowed as the cost of doing business under high-tariff regimes squeezes margins.3
- Inventory Depletion: Domestic stocks have plummeted from 750,000 tonnes at the start of 2025 to below 300,000 tonnes, leaving the market vulnerable to even minor logistical disruptions.4
Impact on Downstream Manufacturing
The “Midwest Premium” acts as a bellwether for inflationary pressure across the US industrial heartland. For sectors ranging from aerospace to food packaging, the inability to source affordable raw material is leading to “demand destruction.”
| Industry Sector | Primary Impact | Economic Result |
| Automotive | Structure and engine parts | Estimated vehicle cost increase of $1,500–$3,000 per unit. |
| Aerospace | High-strength alloys | Squeezed margins on long-term fixed-price contracts. |
| Packaging | Beverage and food cans | Shift toward plastic and glass alternatives to mitigate costs. |
| Construction | Aluminum extrusions/tubing | Delays in infrastructure projects due to volatile bidding prices. |
The “AI Power” Rivalry
Compounding the crisis is a newfound competition for electricity.5 Smelting aluminum is an energy-intensive process requiring long-term power contracts at roughly $40/MWh to remain viable. However, US smelters are now competing with AI data centers, which are frequently outbidding industrial users with offers exceeding $115/MWh.
This energy rivalry has largely stalled the “smelting renaissance” the tariffs were meant to inspire. To date, only one major domestic restart—Century Aluminum’s Mount Holly facility—has been announced, while other potential projects remain contingent on securing competitive power that is currently being diverted to the tech sector.6
Legal and Regulatory Uncertainty
The market remains on edge as the US Supreme Court is expected to deliver a landmark ruling this month regarding the President’s authority to impose such open-ended tariffs under the International Emergency Economic Powers Act (IEEPA).7 While Section 232 tariffs (the specific mechanism for aluminum) are historically more legally secure, a broader ruling against executive tariff power could trigger a chaotic unwinding of current market premiums.
“The premium is way higher than costs justify,” noted Jorge Vazquez, managing director at Harbor Aluminum.8 “It reflects a market that is not just pricing in transport and duties, but the very real fear of physical scarcity.”
Aluminium Bars, Sheets Picture by scraplocal
