Overview
Deutsche Bank analysts note that a prospective trade agreement between the United States and Canada aims to lower steel and aluminium tariffs, with particular focus on reducing the Canadian aluminium import duty from the current 50% to 25%. The change is expected to alter the flow of aluminium into the United States, which sources roughly 80% of its primary aluminium from imports, three‑quarters of which originates from Canada.
Tariff Change Details
The tariff reduction would cut the duty on Canadian aluminium by half, moving from 50% to 25%. While the marginal tonne of aluminium entering the United States would still be subject to a 50% tariff, the overall reduction is projected to influence market premiums.
Premium Impact
Deutsche Bank projects that U.S. Midwest premiums, presently at 107 cents per tonne, could fall to a range of 80‑90 cents per tonne at current LME price levels, reflecting eased supply tightness as Canadian shipments increase. European premiums may receive modest support because a larger share of Canadian metal would be diverted to the United States rather than Europe; however, European premiums have been on a downward trend due to expectations of improved supply from the Middle East.
Company Implications
Canadian producers such as Rio Tinto and Alcoa stand to benefit from lower tariff costs while premiums remain elevated. Rio Tinto’s attributable primary aluminium production is estimated at 3.3‑3.4 million tonnes annually, with about 65% generated by its Canadian smelters; Deutsche Bank estimates the tariff cut could raise Rio Tinto’s group EBITDA by approximately 3%. Conversely, U.S. domestic smelters could encounter headwinds from the reduced Midwest premiums. Norsk Hydro, which operates significant extrusion and recycling facilities in the United States, may see its group EBITDA decline by NOK 1‑2 billion as recycling spreads normalize.