US ALUMINUM SERIES: Uncertainty clouds 2025 US aluminum market

This report is part of a series on impactful trends in the US aluminum market based on S&P Global Commodity Insights pricing, news, and analytics.

The US aluminum market started 2025 immersed in uncertainty, with tariff risk, the outlook for demand under a new presidential administration, and what lies ahead with further potential interest rate cuts among the year's wild cards.

The US aluminum premium was declining at the end of November, pressured by weak end-user demand and tight LME spreads. At the time, the market was bracing for more downside potential as the end of the year approached and inventories were worked down.

All that changed Nov. 25, when US President-elect Donald Trump announced that he planned to impose new tariffs on Canada, Mexico, and China as soon as he takes office Jan. 20. Trump said he would impose a 25% tax on all products entering the country from Canada and Mexico and an additional 10% tariff on goods from China as one of his first executive orders.

This sent the market scurrying to build up inventories that a day before were unwanted, as those tariffs meant much more expensive primary aluminum units. Market participants said the tariffs, coupled with policy changes under Trump, were expected to support real domestic demand.

One market sector that has the potential to benefit from Trump's policies is the infrastructure construction market, but market participants said the US needs to see more significant cuts in interest rates to see an improvement in infrastructure demand.

S&P Global Market Intelligence said that tighter monetary policy and a higher terminal federal funds rate "add to a weaker housing forecast. Housing starts are lower in both the near term and long term."

One of the laggard sectors for demand last year was automotive, and market participants said they did not expect anything different this year.

According to S&P Global Mobility, 2025 automotive forecasts have been downgraded across the board, "reflecting expected post-election US policy shifts. Resulting impacts to vehicle demand will be significant, especially interest rates, trade flows, sourcing, and BEV [battery electric vehicle] adoption rates."

In the US, Mobility projects North America light vehicle production is expected to slide to 15.2 million units in 2025 from the projected 2024 level of 15.5 million units and is "reflective of a still uncertain environment for auto sales levels." This is still up from the auto production of 13 million units in both 2020 and 2021, but well below the 17 million units in 2018.

Mobility noted that automotive dealer inventories were at a nearly 4.5-year high of 2.8 million vehicles, or a 53-day supply. He called it a "negative US demand cycle post 2026."

Chris Hopson, manager of North American light vehicle sales forecasting for Mobility, said, "Interest rates are expected to shift further downwards, but inflation levels are anticipated to remain sticky, and new vehicle inventory should also progress, but careful management is expected too. Combined with an uneasy consumer, we project this translates to mild growth prospects for auto sales."

US aluminum major Alcoa said at an investor presentation in December that while it also saw a slowdown in the automotive sector, it forecasted a recovery in the packaging sector.

In the can market — what was seen as one of the bright spots for aluminum in the US — a cansheet mill official warned that 2024 may have appeared to be a stronger growth year for cansheet than it really was. He explained that 2023 had been a correction year. "We expected higher growth [in 2023] and overstocked. We believed the lower level would continue [in 2024], and normal growth came back this year."

He said his company was "a little concerned that can consumption may level off; there is the risk that in the US can production could be higher than consumption."

Aluminum can maker Ball Corp. said at its Investor Day in June that it was committed to growth targets of 2-3%/year.

But so much of these demand forecasts hinge on how aggressively the US Federal Reserve will cut interests rates this year and, by the looks of it, the cuts are expected to be tempered.

Market Intelligence said it expected limited US interest rate cuts in 2025, after the Fed lowered its target range for the funds rate by the expected 25 basis points to 4.25%-4.50% Dec. 18. "As higher tariffs on US imports are forecast to boost US inflation, we expect the Fed to pause its easing cycle in mid-2025 at a range of 3.75%-4.00%," it said.

Market Intelligence said in its 2025 Capital Markets Outlook that "how much Fed officials will ultimately cut and how long it may take have become the biggest open questions... . Based on the latest economic data, Fed officials have little motive to cut rates with urgency."

The Fed's first interest rate meeting of 2025 is scheduled for Jan. 28-29.

S&P Global Commodity Insights' Commodity Briefing Service said "prospects for global primary aluminum consumption remain reasonably firm overall this year, albeit tempered by the slightly lower economic growth projected for the major economies. Adding to the mix is the increasing uncertainty over the possible impact of new domestic and international policies when the new US administration comes into power Jan. 20."

Despite some less-bullish demand forecasts, Aluminum Association President and CEO Charles Johnson said "While there may be some uncertainty ahead, aluminum will continue to be a critical material used to build a stronger, more-sustainable America, and the industry stands ready to deliver."