The Zhitong Finance App learned that the Trump administration announced an incentive plan on Monday: all companies that build, expand, or refurbish aluminum smelters in the US can receive tariff relief on imported aluminum. According to the plan, the tariffs on imported aluminum will be reduced from the current 50% to about 25% for enterprises that have been approved by the US government and meet the new conditions.
US President Trump previously imposed a 50% tariff on imported aluminum with the aim of promoting the return of production capacity in manufacturing industries that widely use lightweight metals such as automobiles and washing machines to the US. However, the initiative had limited results, and was lobbied by many countries to lower the tax rate.
More importantly, America's current raw aluminum production capacity is far insufficient to meet domestic demand, and is highly dependent on imports — especially from Canada and the Middle East, to fill the consumption gap.
Currently, there are only 4 aluminum smelters in operation in the US, compared to 23 in 2000. About half of the aluminum consumed in the US is produced in Canada, and local smelters rely on cheaper energy such as hydropower for production. Electricity cost factors are a huge constraint on local expansion — the last new smelter in the US was put into operation more than 40 years ago.
Since the 50% punitive tariff came into effect in June last year, the US Midwest aluminum lift (that is, the surcharge for delivery to the region above the global benchmark price) has soared sharply. Meanwhile, another round of supply shocks triggered by the war in Iran has further boosted the region's aluminum litres by nearly 100%.
A liter of aluminum in the Midwest of the US directly reflects the material costs that American manufacturers bear when producing products such as home appliances, beverage cans, and automobiles — they have actually always paid the highest price of raw materials in the world, and have adopted an “instant procurement” model to buy only enough to meet current production needs.
In terms of the global benchmark London Metal Exchange (LME), aluminum prices have also risen sharply this year due to double supply shocks. LME aluminum prices closed at $3,140 per tonne, a slight decrease of 0.3% before the White House announced the plan.