Deutsche Bank has outlined a mixed impact on the aluminum market if the U.S. and Canada proceed with plans to halve import tariffs on Canadian aluminum from 50% to 25%. The proposed reduction, a priority for Canada, would ease costs for Canadian producers but create headwinds for U.S. domestic smelters and European premiums.
The U.S. currently sources about 80% of its primary aluminum needs from imports, with roughly three-quarters of those imports coming from Canada. Deutsche Bank estimates that Rio Tinto’s group EBITDA could rise by around 3% if the tariffs are reduced, given the company’s 65% share of primary aluminum production from Canadian smelters. Rio Tinto’s attributable production stands at 3.3–3.4 million tonnes per year.
The U.S. Midwest premium, currently at 107 cents, is expected to decline to between 80 and 90 cents under lower tariffs, assuming London Metal Exchange prices remain stable. However, the marginal tonne entering the U.S. would still face a 50% tariff, limiting the immediate impact. The premium has remained elevated due to global supply constraints linked to the U.S.-Iran conflict, which has disrupted Middle East supply flows.
While Canadian producers such as Rio Tinto and Alcoa would benefit from reduced tariff costs, U.S. domestic smelters would face pressure from lower Midwest premiums. European premiums, already declining from elevated levels amid improving Middle East supply expectations, could see modest support as more Canadian metal diverts to the U.S. instead of Europe.
Norsk Hydro, which operates significant U.S. extrusions and recycling operations, may see its group EBITDA decline by NOK 1–2 billion as recycling spreads normalize. The tariffs on Canadian aluminum took effect in early 2025, and any reduction would mark a shift in trade policy between the two countries.
Analysts note that the potential agreement aligns with Canada’s push to lower steel and aluminum tariffs, though the broader implications for the aluminum market remain contingent on global supply dynamics and trade developments.
