Concerns of tariff-induced demand destruction grow in US aluminum sector

Traditional buyers of aluminum may consider switching to other materials if a 50% US tariff on aluminum imports remains in place.

Packagers, builders, and automakers have watched as US President Donald Trump raised aluminum tariffs from 10% when he took office to 50% on June 3. The premium paid by US aluminum buyers has nearly tripled over the same period, driving concerns of demand destruction. Though some aluminum producers believe Trump will eventually lower tariffs, the industry is increasingly worried they will start to lose consumers.

"The tariff volatility keeps adding to the confusion in the markets," executive director for the DC-based SAFE Center for Strategic Industrial Materials, Joe Quinn, told Platts.

"The tariffs went from 10% to 25% to 50% in three months. And if it stays at the 50% mark, yes, that will generate revenue for some aluminum producers, but prices that high, there's a legitimate fear of demand destruction. Customers may go to different materials."

US President Donald Trump implemented 25% tariffs on all aluminum and steel imports on March 12. On June 3, Trump signed an order to increase the duties to 50%, leading to warnings from the US aluminum sector that the move may lead to reduced aluminum demand and inflation. With no tariff relief in sight, industry experts have warned that, while aluminum demand has been healthy in the first half of 2025, demand destruction is possible in the next couple of quarters.

The Platts spot US Aluminum Midwest Premium saw unprecedented volatility following Trump's order for 50% duties on all aluminum imports, reaching an all-time high of 68 cents/lb on June 6.

The assessment was sitting just below the record at 67.45 cents/lb on July 15, up 188.9% since the start of 2025.

"I think [demand destruction] is concerning," Molly Beerman, CFO of Pittsburgh-based Alcoa, said at a June 17 conference in New York.

"What we're seeing now in our second quarter order book, which remains strong, is that our rolling and extruding customers are actually getting more orders from their customers because the end consumers are preferring domestic supply during these periods of uncertainty," Beerman said.

"So, initially, we're not seeing the destruction. However, if it lasts longer, we do worry that inflation will work its way in and producers will not be able to offset the higher costs at the 50% tariff level. Eventually, that will result in higher prices to the end consumers."

Platts assessed the Aluminum P1020 Transaction delivered US Midwest at 185.11 cents/lb on July 15.

On the same day, Platts assessed the Aluminum P1020 Transaction Price Implied Duty-Unpaid Delivered US Midwest at 125.07 cents/lb, down 0.9% since the beginning of the year. This assessment calculates the US transaction price without duties. The gap between the two assessments reached 60.04 cents/lb on July 15.

Demand dip danger

A dip in US demand for aluminum is possible across all three of aluminum's major end-consumer sectors, according to April Soriano, aluminum analyst at S&P Global Energy.

"We understand there have still been recent pockets of strength in the can sheet and automotive sectors, but if high tariffs remain in place, the impact on consumption from the construction, transport and packaging sectors is expected to be more pronounced in the second half of the year," Soriano told Platts.

The transportation sector was the largest consumer of aluminum in North America and made up 33.2% of aluminum shipments in 2022, according to the US-based Aluminum Association.

"I'm not sure when demand erosion will start to happen, but it's not getting better," an automotive sector consumer source told Platts.

The containers and packaging sector accounted for 21.6% of shipments, and the building and construction sector received 13.1% of shipments.

"Major users of aluminum packaging, for instance, have said they might move away from aluminum to plastic bottles and cartons," Soriano said. "However, it must be said that our premium forecasts still indicate we expect something to give on the tariffs front."

Unpredictable policy problems

Industry leaders have said that volatile US tariff policy can be damaging for domestic demand and investments as market participants struggle to make business decisions in an ever-changing environment.

According to Quinn, the uncertain market conditions may cause challenges for the construction of new smelters, counteracting one of the administration's goals in setting the tariffs. Emirates Global Aluminum recently announced a $4 billion Oklahoma smelter and Chicago-based Century Aluminum is working on a "green aluminum" smelter project.

"It's not really allowing for a conducive economic environment to grow these investments," Quinn added.

Canadian Prime Minister Mark Carney said on June 16 that the US and Canada will aim to negotiate a trade deal within 30 days after meeting Trump at the G7 summit; however, there have been no official signals of tariff relief yet.

Canada is the largest supplier of primary aluminum to the US, and duties on Canadian metal are the primary driver of the significant price increases of US aluminum.

On July 11, the US announced it would implement 35% tariffs on Canadian imports not covered under the USMCA trade agreement. Although the new duty does not change the 50% rate on Canadian aluminum, it signals that trade talks between the two nations have made little, if any, progress.