Why are aluminum prices and lead times going up?
By now any fabricator in the metal building façade industry has seen price increases from all their raw material vendors. But why so sudden, and why did the prices go up before the tariffs were even applied?
We decided to do a research paper on the economics of aluminum in the US Building Industry to learn more about this intricate economy.
Aluminum 101 – where does it come from?
Primary aluminum is an industrial metal commodity that is highly globalized. Ingots, the stock form of aluminum, are imported from outside sources. Aluminum naturally occurs in the form of bauxite. Initial processing typically takes place in close proximity to bauxite mining locations1, as bauxite is a very bulky material and it takes 2 to 2.5 tons of bauxite to yield 1 ton of alumina2. Similarly, 1.9 tons of alumina produces 1 ton of aluminum by smelting, an electrochemical process that is very energy intensive3. Smelting facilities typically are located either in close proximity to alumina refineries or where there is an abundance of cost-efficient electricity3. Aluminum ingots come from specific areas around the world where aluminum production infrastructure has been established based on these factors.
The Impact of Supply, Demand, and Speculation
Trading of metals has historically occurred since the bronze age. During the industrial revolution, Great Britain became heavily involved in trading metals globally, and the London Metal Exchange was established for futures trading1. “Futures” are contracts to buy or sell a specific quantity, on a set date and at a fixed price4. To this day, commodity prices are determined in general through trading on the London Metal Exchange (LME). The “Midwest Premium” is an assessment of additional value based on the regional supply and demand which affects the actual price5. That price has more than doubled from October 2024, in direct correlation with political developments, as can be observed at the graph below.
Domestic Manufacturing in Decline
Statistics on aluminum as a commodity do not distinguish aluminum used specifically for the building industry6. From 2020 to 2023, Canada was the source for 56% of all imported primary aluminum6. Major aluminum smelting infrastructure is located in Canada because of the profusion of hydroelectric energy there7. Production of primary aluminum in the United States has been minimal for some time with a continued decline through 20246, decreasing by 30 percent from 20208. The imposition of tariffs in March 2025 is for the stated intent of increasing domestic production of primary aluminum by bringing existing smelters up to capacity and incentivizing the construction of new smelters8. Primary aluminum is produced from alumina8, which is largely imported.
Is Aluminum made in USA subject to tariffs?
What is seemingly unreconcilable is that the tariff on all imported aluminum is 25%, yet the price of aluminum with the Midwest Premium has gone up nearly 150%. The Midwest Premium is assessed by S&P Global Platts, a price reporting agency with no financial stake in commodity prices5. It is important to understand that the Midwest Premium is based on regional supply and demand. The disproportionate increase is attributed to incredible uncertainties, such as the fact that the tariff could be increased at will by the political administration of any country, foreign suppliers may not be willing to pay the tariff, the possibility of trade war resulting in embargoes, perhaps buyers expecting subsidies, or the expectation of higher value use for aluminum such as defense industry. The Midwest Premium is merely a reference to the projection of the regional supply and demand, factoring in both past results and future outlook, including potential impacts of tariffs and trade wars. The aluminum processors then add the Midwest Premium to their price of aluminum, unrelated to their actual costs, and indiscriminate of whether the primary aluminum was made in USA or imported. Therefore, aluminum that has been 100% made in the USA is impacted by the tariffs at the same rate as aluminum made from imported primary aluminum.
When will aluminum prices and lead times come back down?
On Thursday March 13th, a delegation from Canada met with the U.S. Secretary of Commerce; the readout from that meeting states that the asserted intentions of the tariffs are to “eliminate the current status quo9.” A new aluminum smelter is a large capital investment, costing at least $1 billion, and takes three years minimum to build and become operational10. Modernization and expansion of existing aluminum smelters in the U.S. would only be a relatively less costly and quicker means to increase domestic capacity. In the case of aluminum, the tariffs do not address two core issues: alumina would be largely imported, and the high price for electricity which is the predominant factor for aluminum smelting.
Until domestic smelting capacity increases and the price of electricity comes down, significant reduction in aluminum prices is only a dream.
References
1Buchan, D. and C. Errington. 2018. Commodities Demystified: A Guide to Trading and the Global Supply Chain – Second Edition. Trafigura.
2World Bank. 1981. Bauxite and Aluminum Handbook.
3Aluminum: The Element of Sustainability. 2011. The Aluminum Association.
4Guide to the London Metal Exchange. 2022. The London Metal Exchange.
5Myths and Facts about the Midwest Premium. S&P Global Platts.
6Merrill, A. M. 2025. Aluminum. U.S. Geological Survey, Mineral Commodity Summaries.
7Hydropower in Canada: Past Present and Future. 2008. Canadian Hydropower Association.
8Adjusting Imports of Aluminum into the United States. 2025. Proclamation No. 10895. Federal Register 90 (31).
9Readout from Secretary Lutnick’s Meeting with Minister Leblanc, Ontario Premier Ford, Minister Champagne, and Ambassador Hillman.
U.S. Department of Commerce.
10Watson, C. D. 2022. Aluminum Manufacturing: Industry Trends and Sustainability, Document R47294. Congressional Research Service.
