Rio Tinto Group has announced it will implement surcharges on aluminum shipments to the United States. This decision comes as the U.S. market faces significant challenges due to import tariffs and rising consumer costs. The Anglo-Australian mining company cites low inventories and increasing demand as reasons for the additional charges on aluminum orders.

The U.S. heavily relies on foreign aluminum, with Canada being the largest supplier, accounting for over 50% of U.S. imports. The market has been further strained by a 50% import tariff imposed by President Donald Trump earlier this year. This tariff has made Canadian aluminum shipments prohibitively expensive for American manufacturers and consumers, forcing them to rely on dwindling domestic stockpiles and exchange warehouses.

The new surcharge adds to the existing Midwest premium, which is an additional cost on top of the London benchmark price. This premium reflects expenses related to transportation, storage, insurance, and financing. The surcharge ranges from one to three cents above the Midwest premium, according to sources familiar with the situation. While this may seem minor, it translates to an additional $2,006 per ton on top of the raw metal price of approximately $2,830, resulting in a total premium exceeding 70%.

Market observers describe the current aluminum market as severely disrupted. The price for aluminum delivered to the U.S. reached a record high last week, driven by shrinking stockpiles. Michael Widmer, head of metals research at Bank of America Corp., noted, "It’s a new reality now that if the U.S. wants to attract aluminum units, it has to pay up because the U.S. is not the only market that actually is short."

Jean Simard, head of the Aluminium Association of Canada, explained that buyers seeking payment terms beyond 30 days should anticipate a premium to cover higher financing costs for producers. He stated, "The 50% tariff on aluminum put in place by the U.S. administration significantly increased the risk of holding aluminum inventory in the U.S. as any tariff change could directly impact the economics of cash-and-carry inventory financing trades."

In Europe, the regional aluminum premium has decreased by about 5% from the previous year but has begun to recover due to supply outages and the upcoming implementation of a European Union fee on imports based on greenhouse gas emissions. Analysts predict that the global benchmark price for aluminum could exceed $3,000 per metric ton.

Trump initially set aluminum tariffs at 25% in February and doubled them in June, claiming it was to protect American industry. As a result, U.S. importers have turned to domestic supplies to avoid the steep import taxes. Currently, U.S. warehouses used by the London Metal Exchange have no aluminum left after the last 125 tons were withdrawn in October. Alcoa, a leading U.S. aluminum producer, reported that domestic stockpiles are now at only 35 days of consumption, a level that typically leads to higher prices.

Before the recent price surge, aluminum producers in Quebec had been exporting more metal to Europe to offset losses in the U.S. market. Quebec accounts for about 90% of Canada’s aluminum production capacity, with the U.S. being its primary market due to geographic proximity.

The tightness in the U.S. aluminum market has been worsened by presidential proclamations stating that tariffs do not apply to imported aluminum that is smelted and cast in the U.S. This has increased demand for U.S.-made aluminum from overseas manufacturers, who can then ship products to the U.S. duty-free. Widmer concluded, "If you are a net importer of aluminum units, and you’re putting a tariff on those imports, ultimately, it’s not the supplier who pays — it’s the consumers, hands down."