As aluminum prices surge in the United States, Rio Tinto imposes another "surcharge" on North American aluminum products.

Rio Tinto Group, the world’s largest aluminum producer, is imposing surcharges on its aluminum products sold to the United States, a move that may further disrupt North America's aluminum market, which is already under pressure from import tariffs.

According to media reports on Tuesday, the Anglo-Australian mining giant cited low inventory and demand beginning to exceed available supply as reasons for adding extra fees to aluminum orders shipped to the U.S. The U.S. currently relies heavily on foreign aluminum supplies, with Canada as its largest supplier, accounting for more than 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 the lightweight metal widely used in soda cans and building materials, making Canadian aluminum too expensive for U.S. metal processors and consumers. The market turned to domestic inventory and exchange warehouse stocks, leading to shrinking supply and soaring prices.

Consumers and traders describe the current market as nearly dysfunctional, and Rio Tinto’s surcharge is the clearest sign yet of how Trump’s tariffs have profoundly disrupted market structure. Last week, U.S. aluminum delivery prices, including the benchmark price and Midwest premium, hit historical highs.

Surcharges Drive Up Costs

The surcharge imposed by Rio Tinto this time adds an extra layer on top of existing fees. U.S. aluminum prices already include the so-called “Midwest Premium” — an additional cost above the London benchmark price, reflecting expenses for transporting, storing, insuring, and financing the metal into the U.S. market.

According to sources, the new surcharge increases the cost by an additional 1 to 3 cents on top of the Midwest Premium. While the amount is not huge, the surcharge combined with the Midwest Premium means an extra $2,006 per ton on top of the roughly $2,830 raw material price, with the total premium exceeding 70%. This ratio already surpasses the 50% import tariff set by Trump.

Jean Simard, head of the Aluminum Association of Canada, explained that buyers requiring payment terms longer than 30 days should expect to pay a premium to offset higher financing costs faced by producers. He stated that the 50% aluminum tariff imposed by the U.S. government significantly increases the risk of holding aluminum inventory in the U.S., as any tariff change could directly affect the economics of financing spot holdings.

Supply-Demand Imbalance Worsens

In February, Trump set the aluminum tariff at 25%, and raised the rate to 50% in June, claiming the move was designed to protect U.S. industry. U.S. importers turned to domestic supplies to avoid high import taxes.

The London Metal Exchange’s warehouses in the U.S. now have no aluminum inventory, with the last 125 tons withdrawn in October. Exchange stockpiles are typically the final line of defense for physical supply. Alcoa, the largest U.S. aluminum producer, said in its third-quarter earnings call that domestic inventory was sufficient for only 35 days’ consumption — a level that would normally trigger price hikes.

Before the recent price surge, aluminum producers in Quebec had already been shipping more metal to Europe to cover losses in the U.S. market. Quebec accounts for about 90% of Canada’s aluminum capacity and, due to its geographic proximity, the U.S. was traditionally its natural customer.

Tensions in the U.S. market have been exacerbated by a specific clause in the president’s announcement. The clause stipulates that if the metal is smelted and cast in the U.S., imported products are exempt from the aluminum tariff. This has created additional demand for U.S.-made aluminum by overseas manufacturers, who use this aluminum to make products that are then shipped to the U.S. duty free.

Michael Widmer, Head of Metals Research at Bank of America, said this is the new reality: if the U.S. wants to attract aluminum supply, it must pay higher prices because it is not the only market facing shortages.

By contrast, in Europe — also a net aluminum importer — regional premiums have fallen by about 5% compared to a year ago. But according to a team of analysts at Morgan Stanley, including Amy Gower, European premiums have recently been rebounding due to supply disruptions and the EU’s upcoming import fees based on greenhouse gas emissions from the production process, set to take effect next year. Analysts expect the current global backdrop to push the global benchmark price above $3,000 per ton.

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