Us midwest aluminum premium tops $1,000 per short ton as tariff and supply crisis converge

The US Midwest delivered aluminum premium has breached $1,000 per short ton for the first time on record, more than doubling since the start of 2026. The premium — the additional cost above the LME cash price that US buyers pay for physical metal delivered to the Midwest — reflects an unprecedented convergence of three forces: the 50% US tariff on aluminum imports (renewable every 90 days), the catastrophic loss of Gulf smelter supply that traditionally fed US markets, and a US domestic demand base that shows no signs of slowing. (Source: Fastmarkets, Aegis Hedging)

The US is heavily reliant on imported aluminum. Domestic primary production — primarily from Century Aluminum's Hawesville and Mt. Holly smelters and Alcoa's Warrick operation — covers only a fraction of national demand. The US imports roughly 4-5 million tonnes of primary aluminum annually from Canada, the Gulf states, Russia, and other origins. The 50% tariff on most origins, combined with the loss of Gulf supply due to the Hormuz blockade, has eliminated two of the largest supply channels simultaneously. (Source: USGS, Aluminum Association)

The tariff structure is the primary driver. The current 50% tariff on aluminum imports, imposed under Section 232 national security authority, applies to virtually all non-USMCA origins. Canadian aluminum, which enters duty-free under USMCA, has become the premium source for US buyers — but Canadian smelters are also running near capacity and cannot fill the gap left by lost Gulf supply. The tariff's renewable clause — requiring review every 90 days — creates perpetual policy uncertainty that discourages long-term contracting. (Source: Reuters, CNBC)

The regional premium divergence is stark. While the US Midwest premium has surged past $1,000/short ton (equivalent to roughly $1,102/metric tonne), European duty-paid premiums have risen to approximately $340/t over LME cash, and Japan's Q2 premiums settled at a record $350-353/t. The US now commands the highest regional premium in the world by a wide margin, reflecting the unique combination of tariff barriers and physical supply scarcity. The US premium is now roughly 3x the European premium — an unprecedented divergence. (Source: Fastmarkets, S&P Global)

The impact on US manufacturing is severe. A buyer contracting 1,000 short tons per month of Midwest-delivered aluminum at the current premium faces an additional $1 million per month above the LME base price compared to pre-tariff norms. For mid-sized fabricators consuming 3,000-5,000 short tons annually, the premium alone adds $3-5 million in annual costs that did not exist two years ago. (Source: Aegis Hedging)

Secondary aluminum and scrap are increasingly being used as substitutes, but the spread between primary and secondary has also widened as primary buyers crowd into the scrap market. The US secondary aluminum market is running at elevated utilization rates, and extrusion-grade billet premiums — a separate but correlated metric — have followed the Midwest premium higher. Extruders serving construction and automotive end-users are already passing these costs through in contract renegotiations. (Source: Fastmarkets)