Here we are, nearly 10% of the way through 2025 and man, did January go by quickly. The month was filled with cold weather, football, and a whole lot of action from the new/old president. This past weekend was a bit hectic as the aluminum industry feverishly sought answers regarding the tariffs President Trump was enacting against China, Canada, and Mexico. A 25% tariff was set for all imports from Canada and Mexico while material from China (and a small subset of Canadian energy) were to receive a 10% tariff. At the 11th hour, North American leaders were successful in reaching a compromise that prevented these tariffs beginning the morning of 2/4. Mexico agreed to send 10,000 soldiers to the border to prevent illegal drugs from crossing the border while Canada made new commitments on border security and launched a joint task force with the US aimed at combatting fentanyl and organized crime. While these actions have delayed North American tariff implementation until at least March 1, the scrambling we endured wasn’t all for not. Through the process it became evident that aluminum falls under the category of “Critical Minerals” and would only face the 10% tariff like oil and gas should tariffs move forward a month from now. Canada’s minister for energy and natural resources immediately headed to Washington DC, pitching the idea of a trade alliance between the US and Canada that would exempt energy and critical minerals from any sort of tariff. Considering 85% of the primary aluminum utilized in the US comes from Canada and that tariffs on oil and gas would negatively impact American consumers who are already struggling with inflationary increases, I can definitely see a carve out for these segments if the tariffs aren’t avoided entirely.
Aluminum prices in January rose about 5c with equal gains in LME and MWP. LME has extended its gains on the short-term avoidance of tariffs but is expected to continue residing in the $2,500-$2,750 range. The Midwest Premium saw a massive 3c bump on 2/3 just as news was breaking that the tariffs on Canada were being delayed. As of this writing the premium sits at just over $0.28/lb. This number represents the full burden of a 10% tariff and only has one direction to go (in the opinion of yours truly) making the $1.4750 MWT a good number to get material sold at.
In the physical domestic scrap markets, tides seem to be shifting. If you recall in last month’s article, I highlighted the drastic UBC price increase in 2024 (25%) and stated we were on the brink of hitting a tipping point where consumers would pivot to other scrap items and prime/hardeners. Well, news broke in January that one major consumer of cans is going to be doing just that in the months ahead. The decrease in demand for UBC from that consumer, coupled with anticipated stronger ferrous prices, a robust regional premium attracting offshore UBC, and better yard flows when the weather does break could finally swing the pendulum for all cansheet inputs in the opposite direction. While relief may soon be on the horizon for cansheet mills, billet manufacturers are seeing the exact opposite. Slower flows of extrusion grade items are being felt and demand seems to be outpacing supply at the current moment. Common alloy grades continue to remain relatively tight while we’ve seen some signs of life from the secondary alloy and ingot manufacturers. New vehicle sales in January continued their upward trend, marking the 4th consecutive month of YOY gains. Even though these are being driven largely by manufacturer incentives, I view it as a positive considering the headwinds (rough winter, high interest rates, and economic uncertainty regarding tariffs).
Please contact me with feedback, ideas for future topics, or offerings on aluminum scrap. I can be reached at 440-813-6325 or michael.anderson@schupan.com.
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