Aluminum Squeeze: Tariffs and Energy Constraints | Commodities
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The US aluminum market is dealing with a potential squeeze as renewed tariffs on imports collide with present energy constraints, raising issues about provide and driving up costs. In keeping with Jeff Currie, Chief Technique Officer of Vitality Pathways at Carlyle, the lack to onshore aluminum manufacturing attributable to its energy-intensive nature is a important issue.
“The question is, can you onshore aluminum production? And the answer is absolutely not,” Currie mentioned in a Bloomberg interview. “If you think data centers and AI are power intensive, aluminum smelting’s in a whole different world. It’s six times more power intensive per dollar revenue than AI data centers. So if you’re already power constrained, there’s no possible way you’re gonna bring all of this aluminum smelting into the United States.”
Currie’s evaluation comes as President Trump has restored 25% tariffs on aluminum imports, impacting key trading companions like Canada, Mexico, and the European Union. These tariffs, which took impact earlier this month, are already impacting bodily market premiums within the US. As reported by Reuters, the U.S. Midwest duty-paid aluminum premium has surged almost 60% because the begin of 2025, reaching above 40 U.S. cents a lb, or almost $900 a metric ton.
The Aluminum Affiliation has additionally weighed in on the difficulty, emphasizing the significance of sustaining a dependable and reasonably priced aluminum provide from Canada. “The aluminum industry supports tariff-free access for Canadian aluminum in the tariffs implemented today,” said Charles Johnson, president and CEO of the affiliation. He additional famous, “The aluminum we import from Canada today is equivalent to the energy generated by at least four Hoover Dams.”
Canada is the most important aluminum provider to the U.S., accounting for 70% of the three.92 million tons imported final yr, in accordance with Commerce Information Monitor. The Aluminum Affiliation argues that home capability is inadequate to fulfill growing demand, notably because the US invests in infrastructure and new applied sciences.
“The US cannot produce all that aluminum; they don’t have the capacity,” mentioned Eivind Kallevik, CEO at Norwegian aluminum producer Hydro, highlighting the provision vulnerability. Trade analysts recommend that the tariff might trigger aluminum to be diverted away from the U.S. and into Europe, the place premiums are at present decrease.
The tariffs have sparked worldwide tensions, with Canada submitting a criticism with the World Commerce Group (WTO) difficult the U.S. levies. Canada argues that the tariffs are inconsistent with U.S. obligations underneath the Common Settlement on Tariffs and Commerce (GATT) 1994.
As a end result of the aluminum tariffs, and world rigidity, Currie is predicting elevated volatility in commodity markets, which discourages investments.
“Volatility is going to explode across all these markets,” mentioned Currie. “The volatility then discourages the investment because [investors will say] I don’t want to invest in this thing; it’s too volatile.”
The views and opinions expressed herein are the views and opinions of the writer and don’t essentially mirror these of Nasdaq, Inc.
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