Mining Giant Imposes New Surcharges on US Aluminum Shipments
Rio Tinto Group is now implementing additional surcharges on aluminum shipments destined for the United States, a decision that threatens to intensify the turmoil in a North American market already reeling from substantial import tariffs. These tariffs, imposed by former President Donald Trump, are significantly increasing expenses for end consumers across various industries.
The Domino Effect of 50% Tariffs on Market Dynamics
The Anglo-Australian mining corporation is applying these extra fees on orders delivered to the U.S., citing critically low inventories and a growing imbalance where demand is beginning to surpass the available supply. This information comes from individuals with direct knowledge of the private contract negotiations, who requested anonymity.
The United States is heavily dependent on foreign aluminum, as its domestic production capacity is insufficient to meet national demand. Canada stands as the primary foreign supplier, responsible for more than half of all U.S. aluminum imports.
This new surcharge introduces further strain to an already extremely constrained U.S. market. Earlier this year, President Donald Trump instituted a 50 per cent import tariff on the lightweight metal, which is a crucial component in products ranging from beverage cans to construction materials. These levies rendered Canadian shipments prohibitively expensive for American metal fabricators and their customers. Consequently, businesses have been depleting domestic stockpiles and supplies from exchange warehouses, leading to a sharp decline in reserves and a corresponding jump in prices.
A 'Charge on a Charge' and a Broken Market
The latest markup effectively acts as a charge on top of an existing charge. U.S. aluminum prices already incorporate the so-called Midwest premium—an additional cost over the London Metal Exchange benchmark price that covers transportation, storage, insurance, and financing for delivering the metal into the American marketplace.
The newly introduced surcharge ranges from one to three cents above the established Midwest premium. While this appears modest, its cumulative effect is substantial. When combined with the Midwest premium, it adds an extra US$2,006 per ton on top of the raw metal price, which is approximately US$2,830. This implies a total premium of over 70 per cent, which actually exceeds the rate of Trump's 50 per cent import duty.
Consumers and traders are describing a market that is fundamentally broken. The surcharge is the most definitive indicator yet of how profoundly the market's structure has been disrupted by Trump's levies. The all-in price for aluminum delivered to the U.S., encompassing both the benchmark price and the Midwest premium, reached a record high last week as stockpiles continue to shrink.
Michael Widmer, head of metals research at Bank of America Corp., summarized the new reality: "The U.S. has to pay up because it is not the only market that actually is short."
Rio Tinto has declined to comment publicly on the surcharges. However, Jean Simard, the head of the Aluminium Association of Canada, provided context, noting that buyers requesting payment terms beyond 30 days should anticipate a premium to offset the producers' increased financing costs.
"The 50 per cent tariff on aluminum put in place by the U.S. administration significantly increased the risk of holding aluminum inventory in the U.S.," Simard explained. "Any tariff change could directly impact the economics of cash-and-carry inventory financing trades."
In contrast to the situation in the U.S., the regional premium in Europe—another net importer of aluminum—has decreased by about five per cent compared to a year ago. Analysts from Morgan Stanley, including Amy Gower, note that it has been recovering recently due to supply outages and the impending implementation of a European Union fee on imports, which will be based on the greenhouse gases emitted during their production. These analysts project that the current global market conditions will push the global benchmark price above US$3,000 per metric ton.
