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Canada is pushing more of its aluminium towards Europe to make the most of higher premiums on offer, after its neighbour the US imposed a 50 per cent tariff on the metal last year.
A loss of Middle East volumes due to the Iran war has hit Europe hardest and intensified competition with the US for low-carbon supply, driving prices to extreme levels, with policy and prices determining where scarce aluminium is shipped, analysts, traders and aluminium industry sources said.
Disruption in the Middle East, which accounts for 9pc of global aluminium smelting capacity, has upended trade flows far beyond the Gulf, industry sources said.
An ensuing tug-of-war is playing out in regional physical market premiums US and European buyers pay above the London Metal Exchange benchmark for aluminium, which is used in everything from cars and beer cans to building materials.
“We are in a situation where the Europeans and the Americans are competing for limited aluminium units,” said Bank of America analyst Michael Widmer.
Duty-paid aluminium premiums in Europe have surged 73pc since the start of the Iran war to a record $621 a metric ton earlier this month, while the US Midwest premium last week hit an all-time high of $1.16 per lb, or $2,557 a tonne.
Gregory Wittbecker, president at Wittsend Commodity Advisors, estimates the US Midwest premium needs to rise to at least $1.20 a lb or $2,645 a tonne for Canadian producers to divert supply back from Europe.
With LME prices around $3,670 a ton, US consumers are paying $6,200 a ton ne for their aluminium while in Europe the cost has jumped to $4,300 a tonne. “The European premium is an incentive for Canadians to push metal east,” said Wittbecker.
The US was traditionally the default destination for aluminium from Canada, which exported a total of nearly 2.6 million tonnes of unwrought aluminium metal and alloys last year, Trade Data Monitor figures showed.
But after US President Donald Trump imposed tariffs on imports, Canadian producers began to divert metal to Europe.
TDM data shows Canadian aluminium accounted for 54pc of US imports in the first quarter of this year, down from 63pc in the same period last year and 75pc in the first three months of 2024.
One reason for this is the so-called netback to producers, which refers to how much profit is actually made after deducting transport, tariffs and other costs from the selling price.
“When comparing US and EU prices from an export perspective one has to shave off the portion going to the US Treasury in tariffs to get to comparable netbacks,” Jean Simard, president of the Aluminium Association of Canada, said.
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