As aluminum prices soar in the United States, Rio Tinto imposes an "additional fee" on North American aluminum products

The world's largest aluminum producer, Rio Tinto Group, is imposing an additional fee on its aluminum products sold to the United States, a move that could further disrupt the North American aluminum market already under pressure from import tariffs.

According to media reports on Tuesday, the Anglo-Australian mining giant cited low inventory levels and demand beginning to exceed available supply as reasons for the extra charges on aluminum orders shipped to the U.S. Currently, the U.S. is heavily reliant on foreign aluminum supplies, with Canada as the largest supplier, accounting for over 50% of U.S. imports.

This move adds new pressure to an already extremely tight U.S. aluminum market. Earlier this year, Trump imposed a 50% import tariff on this lightweight metal, widely used in soda cans and construction materials, making Canadian aluminum too expensive for U.S. metal processors and consumers. The market has turned to consuming domestic inventories and exchange warehouse stocks, leading to a contraction in supply and soaring prices.

Consumers and traders describe the current market as nearly dysfunctional, and Rio Tinto's additional fee is the clearest signal of how Trump's tariffs have deeply disrupted market structures. The U.S. aluminum delivery price, including the benchmark price and Midwest premium, reached a historic high last week.

Additional Fees Raise Costs

The additional fee imposed by Rio Tinto amounts to an extra layer on top of existing charges. U.S. aluminum prices already include the so-called "Midwest premium"—an additional cost above the London benchmark price that reflects transportation, storage, insurance, and financing costs for bringing the metal into the U.S. market.

According to insiders, the new additional fee adds 1 to 3 cents on top of the Midwest premium. Although the amount is not large, the additional fee combined with the Midwest premium means an extra $2,006 per ton based on a raw material price of about $2,830, resulting in a total premium exceeding 70%. This ratio has surpassed the 50% import tariff set by Trump.

Jean Simard, head of the Aluminum Association of Canada, explained that buyers requiring contract payment terms longer than 30 days should expect to pay a premium to offset producers' higher financing costs. He stated that the 50% aluminum tariff set by the U.S. government significantly increases the risk of holding aluminum inventories in the U.S., as any changes in tariffs could directly impact the economics of spot holding financing transactions.

Supply-Demand Imbalance Intensifies

Trump set the aluminum tariff at 25% in February and raised it to 50% in June, claiming the move was aimed at protecting U.S. industries. U.S. importers have turned to domestic supplies to avoid the high import taxes.

The London Metal Exchange has no aluminum inventory in its U.S. warehouses, with the last 125 tons being withdrawn in October. Exchange inventories are typically the last safeguard for physical supply. The largest aluminum producer in the U.S., Alcoa, stated during its third-quarter earnings call that domestic inventories are only sufficient for 35 days of consumption, a level that typically triggers price increases.

Before the recent price surge, aluminum producers in Quebec had been shipping more metal to Europe to offset losses in the U.S. market. Quebec accounts for about 90% of Canada's aluminum production capacity, and due to its geographical proximity, the U.S. has been a natural buyer for the province.

The tension in the U.S. market has been exacerbated by specific provisions in presidential announcements. These provisions state that if the metal is smelted and cast in the U.S., imported products will be exempt from aluminum tariffs. This creates more demand for U.S.-made aluminum from overseas manufacturers, who then ship the products to the U.S. tax-free Michael Widmer, head of metal research at Bank of America, stated that this is the new reality; if the U.S. wants to attract aluminum supply, it must pay higher prices, as the U.S. is not the only market facing shortages.

In contrast, Europe, which is also a net importer of aluminum, has seen its regional premiums decline by about 5% compared to a year ago. However, a team of analysts at Morgan Stanley, including Amy Gower, noted that European premiums have been rising in recent weeks due to supply disruptions and the European Union's implementation of import fees based on greenhouse gas emissions from production processes next year. Analysts expect the current global context to push global benchmark prices above $3,000 per ton