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| Rio Tinto Aluminium |
U.S. Tariffs Force Rio Tinto to Shift from Exporter to Domestic Aluminum Purchaser
Since June 2018, the 50% U.S. tariff on aluminum imports has disrupted traditional trade flows. Rio Tinto, a leading global aluminum producer, now finds it more cost-effective to buy aluminum within the U.S. rather than export Canadian output southward. This strategic pivot reflects the broader market disruption caused by tariffs aimed at protecting U.S. metal industries but resulting in significant supply chain realignments.
The tariffs have compelled Rio Tinto to reduce shipments from its Quebec smelters and instead purchase aluminum ingots from U.S. stockpiles and rivals. The shift is substantial: Rio imported 723,000 tons of aluminum into the U.S. during H1 2018 but has since acquired at least 50,000 tons domestically from the spot market. This supply now includes metal from competitors like Alcoa, Emirates Global Aluminum, and Century Aluminum.
Market Impact: Elevated U.S. Aluminum Prices and Constrained Domestic Production
Aluminum prices in the U.S. Midwest have surged due to the tariffs, rising 81% since early June above global benchmarks. While the London Metal Exchange price hovers near $2,600 per ton, U.S. prices including the Midwest premium approach $4,200 per ton. This price inflation reflects limited domestic production and shrinking imports, increasing pressure on U.S. buyers.
Despite higher prices, domestic U.S. aluminum production cannot fully satisfy demand. Only four operating smelters remain, with high energy costs and long development lead times hindering new capacity. Therefore, the U.S. market increasingly relies on dwindling stockpiles and intra-country metal trade. Rio Tinto’s pivot exemplifies the complexities companies face adapting to this new tariff regime.
ScrapInsight Commentary
The U.S. aluminum tariffs are causing a profound supply chain realignment, raising domestic prices and pressuring import-dependent producers like Rio Tinto. Looking ahead, sustained tariffs may incentivize investment in U.S. smelting but high energy costs pose challenges. Regulators should consider these dynamics to balance industrial protection with market stability and circular economy goals.
