ING’s commodities team says a partial rollback of US aluminium tariffs is unlikely to change market conditions. The 50% levy on primary aluminium remains, with limited US smelting capacity and continued reliance on Canadian supply.
The changes being discussed are said to focus on derivative products rather than primary aluminium. ING says this would leave the Midwest premium elevated after last year’s tariff increase.
Tariff Scope And Market Impact
ING reports that tariffs have already altered US trade flows, moving primary metal away from the US and increasing scrap inflows. It also notes that some Canadian aluminium has been diverted to Europe.
ING adds that exchange inventories are effectively at zero, with ongoing destocking and reports of large Q2 spot enquiries. It says the physical market remains constrained.
ING states that a derivatives-only rollback would not feed through to LME pricing and would have a modest effect on the Midwest premium. It also says global aluminium supply is tight, inventories are low, speculative positioning is elevated, and policy risk is fragmenting regional markets.
Trading Implications And Regional Spreads
Looking back at the analysis from 2025, we see the situation has not changed much. The core 50% tariff on primary aluminum remains the defining feature of the US market. Any minor tariff adjustments on other products last year proved to be insignificant, just as we predicted.
The persistent tariff continues to support a high Midwest premium, which is holding firm around 19 cents per pound. This structural tightness in the US creates a disconnect between LME prices and the actual cost of metal for American consumers. For traders, this sustained premium makes long positions on CME Midwest Premium futures a viable strategy to hedge against or speculate on continued domestic tightness.
Global exchange inventories confirm this tight supply picture, with LME stockpiles currently sitting below 400,000 tonnes, near multi-decade lows. Such low inventory levels mean the market is extremely sensitive to any supply disruptions, making price spikes more likely. This suggests that buying call options on LME aluminum could be a cost-effective way to gain upside exposure while managing risk.
US domestic production has also failed to fill the gap, with annual primary smelting output still struggling to get above 900,000 metric tons against a demand of over 5 million tons. This heavy reliance on imports, particularly from Canada, is a permanent fixture now. This fundamental deficit reinforces a bullish outlook for North American aluminum prices relative to the rest of the world.
Therefore, the key trading dynamic is the regional price fragmentation we saw developing last year. We believe strategies that play on the price difference between regions, such as going long the Midwest premium contract while hedging with a short LME futures position, remain attractive. The fundamental drivers that created these opportunities in 2025 are still firmly in place today.
