Canada’s exemption from US tariffs on imports of aluminum metal has boosted earnings at the Canadian operations of companies such as Rio Tinto and Alcoa, but has not cut costs for US consumers. In May, the United States lifted the Section 232 tariff of 10% imposed on Canadian imports of aluminum, a vital ingredient for auto makers, drinks firms and military equipment companies.
Aluminum costs for US consumers are the benchmark price on the London Metal Exchange at around USD 1,810 a tonne plus the physical market premium, around USD 400 a tonne.
Analysts said that USD 192 of the premium is the tariff non-exempt producers pay.
Citi analyst Oliver Nugent said that “About 70% of US aluminum demand can be met without paying import duties, yet 100% is pegged to the duty payable adding the bank’s estimate for US aluminum demand this year was 5.57 million tonnes.
It said that “Canadian producers are making good margins on physical premiums. It’s a negotiated market and up to consumers to push the premiums down. The surprising thing is that there isn’t a two-tier structure. One tier for producers that pay duties and another for those that don’t.”
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