Rio Tinto’s Additional Tariffs Put the US Aluminum Market on the Eve of a “Supercycle”

The tense market situation is reflected in inventory data. Aluminum inventories at LME-registered warehouses in the United States were drawn down to zero in October, hitting bottom.

SEATTLE (Scrap Monster): Rio Tinto Group (RIO), the world’s largest aluminum producer, recently began imposing a surcharge on aluminum shipments to the US market. This move is likely to further tighten the already strained aluminum supply situation in North America. The market has been in constant turmoil since the beginning of this year, heavily impacted by the high 50% import tariffs imposed by the Trump administration. Concurrently, global electric vehicle capacity expansion, growth in solar power generation, and the AI data center construction boom led by tech giants like Google, Microsoft, and Meta have collectively driven a surge in demand, causing global aluminum demand to consistently outstrip supply. In the view of Wall Street institutions, aluminum is being pushed into a typical “super cycle” by robust demand.

Tariffs and Surcharges Pile Up, Supply Bottlenecks Worsen

According to informed sources, the UK-based mining giant is adding an extra fee to aluminum orders shipped to the United States, citing low inventories and US demand persistently exceeding its supply capacity. Domestic US aluminum production capacity is severely insufficient and, apart from Alcoa, is extremely reliant on imports, with Canada being its largest overseas supplier, accounting for over half of total imports. The high tariffs imposed by Trump have made Canadian aluminum too expensive for US consumers, leading companies to heavily draw down tight domestic inventories and exchange reserves. The result is continuously decreasing supply and rising aluminum prices. This new surcharge is an additional markup on top of the existing “Midwest Premium,” making the actual price of aluminum in the US market significantly higher than the benchmark price.

 Due to its lightweight, corrosion-resistant, good electrical and thermal conductivity, and 100% recyclable properties, aluminum perfectly aligns with the global long-term trends of “decarbonization + electrification + digitalization,” making it a fundamental material in almost all industrial sectors, including transportation, construction, packaging, and electronics. Its importance is particularly pronounced in the booming AI data center sector.

Although the amount of Rio Tinto’s price increase is relatively moderate, when combined with the already high “Midwest Premium,” calculations show that it adds an extra cost of up to $2,006 on top of the London Metal Exchange (LME) benchmark price of approximately $2,830 per ton. This implies a total premium rate exceeding 70%, already far surpassing the 50% tariff imposed by Trump.

Inventories Hit Bottom, Aluminum Super Cycle May Be Imminent

The tense market situation is reflected in inventory data. Aluminum inventories at LME-registered warehouses in the United States were drawn down to zero in October, hitting bottom. Alcoa also noted in its financial report that domestic US aluminum inventories are only equivalent to 35 days of consumption, a level that typically signals further price increases. Wall Street institutions like Citigroup predict that the current backdrop will push LME aluminum prices above $3,000 per ton, potentially maintaining levels above $3,500 for an extended period, and even reaching $4,000 under extreme scenarios. Citigroup analysts emphasized that aluminum prices must remain high for a sustained period to incentivize investment in new production capacity, avoiding a huge supply shortfall in the future. They rank aluminum as a key beneficiary material, equally important as AI computing power.

 Courtesy: www.nai500.com