Increased transparency could help US aluminum market navigate tariffs, uncertainty ahead

The threat of new US tariffs on imports of primary aluminum from key trading partners, including Canada, looms large over the domestic market.

President Donald Trump promised as much prior to being sworn in for his second non-consecutive term. And shortly after taking office, he said he would announce tariffs on Feb. 1 of up to 25% on all exports from both Canada and Mexico.

Such a move would mirror Section 232 tariffs implemented during Trump's first term, in 2018, of 25% and 10% on most global steel and aluminum imports, respectively.

Around 76% of all types of aluminum imports, and 85% of P1020 purity aluminum, come from Canada, according to US Department of Commerce data. Those imports account for about 64% of US demand, data from the Aluminum Association showed.

Tariffs typically result in higher prices, and end-users and consumers are usually the ones who pick up the cost.

US aluminum market participants have pointed to the threat of new tariffs, among other market factors, for the recent rise in domestic aluminum prices. The Platts US Midwest Aluminum Transaction Premium (MWP) assessment hit an 18-month high of 24.05 cents/lb on Jan. 6, before drifting lower in recent days. It was assessed at 23.95 cents/lb as of Jan. 22.

Transparent market activity aids price discovery

While expected tariffs, market uncertainty, stubborn inflation and geopolitics cloud the outlook for aluminum, the US market is seeing improved transparency around trading and price formation.

Fully transparent data -- meaning the name of the submitting entity is included for publication, in addition to other key information such as tonnage, shape, delivery period and credit terms -- emerged in the Platts US Midwest Aluminum Market on Close (MOC) assessment process in 2024.

Platts, part of S&P Global Commodity Insights, published roughly 1,800 unique market heards testing value for its US Midwest Aluminum Transaction Premium assessment last year. Nearly 370 of these heards -- 21% -- involved named bids, offers or transactions, according to Platts data.

Such submissions are assigned highest ranking in the hierarchy of market data collected by Platts.

Other types of data -- unnamed bids, offers, trades and indications of value, for example -- are still collected throughout each trading period. However, named data is given higher priority over unnamed data when evaluating all the information at hand, at the market close.

The emergence of named, fully transparent data in the Platts MWP MOC has resulted in next-level transparency for market participants.

A year on from the first named data submission

The first entity to submit named data for the MWP MOC was trading firm ARG International in an offer published on Jan. 29, 2024, from the sidelines of the annual S&P Global Commodity Insights Aluminum Symposium. This offer, priced at 19.05 cents/lb over the LME cash settlement, was for delivery via truck or rail within 7-30 days, net 30-day payment terms.

While Platts published multiple sales and interest to trade in ARG's subsequent transparent offers over the following months, and while market participants continued to report detailed bids, offers and trades on an unnamed basis, ARG was the sole contributor submitting fully transparent MWP MOC data until June 2024, when trader Gunvor SA also began submitting named bids and offers.

The two were followed by several other trading firms seeking review for named participation in the MWP MOC.

In August 2024, Platts reported that Greenwich Metals Inc had been approved for MWP MOC participation, followed by GT Commodities LLC and Glencore Ltd in September and November, respectively. Although Greenwich and Glencore were approved for participation, they had not submitted fully transparent bids or offers by the end of 2024.

The reviewed entities' participation in the MOC resulted in 306 fully transparent bids and offers submitted last year, as well as 6 MOC trades between reviewed participants. There were an additional 20 direct, confirmed trades -- a number of which resulted from transparent, named bids and offers published in the MOC.

Market participants are now bracing for the impact tariffs would have on aluminum pricing, trade flows and supply chains.

As such, buying so far in the New Year has been muted, with many frozen by the uncertainty ahead.

While some expect new tariffs to be short-lived and used mostly as a negotiating tactic by the new president, few believe they won't be implemented.

"It's a volatile situation, but the trade war is real," a trader said. "Anyone who does not see that is not from planet Earth."

Increasingly granular data in the US MOC can only help bring clarity and order to a market clouded by uncertainty and poised for possible chaos.