Core Insights - The aluminum market in the U.S. has reached a historical high in premiums, significantly increasing the cost of acquiring aluminum, driven by tariffs and global supply constraints [1][3] - The Midwest U.S. aluminum premium hit $0.8810 per pound (equivalent to $1942 per ton), with the actual price for U.S. spot buyers rising to $4792 per ton, reflecting a cumulative increase of over 155% since June [1] Tariff Impact - The increase in aluminum import tariffs from 25% to 50% by the Trump administration in June has led to a current tariff burden of $1425 per ton, more than doubling from $560 at the beginning of the year [3] - The expectation of permanent tariffs has intensified following the cancellation of trade negotiations with Canada, which is the largest aluminum supplier to the U.S., accounting for over 70% of imports [3] Global Supply Constraints - A structural supply shortage in the global aluminum market is contributing to rising costs, with an anticipated supply gap of 1.8 million tons this year [3] - China's net exports of refined metals and semi-finished products have decreased significantly, alongside a decline in aluminum production outside of China, leading to a total reduction of 2 million tons in global aluminum supply [3]

Investment Rating - The industry rating is "Recommended" [5] Core Insights - The report indicates that the company expects a negative impact of approximately $105 million on its primary aluminum business due to the 25% Section 232 tariffs imposed on Canadian aluminum imports, with a quarter-over-quarter increase of about $90 million [1] - The company anticipates an annual cost of $400 million to $425 million due to these tariffs, significantly affecting its profitability [1] - The Midwest aluminum premium has not reacted as strongly as the company had anticipated based on the 25% tariff expectations, leading to a current annual net profit of approximately -$100 million [6] Summary by Sections Company Overview - In Q2 2025, the company projects a $105 million adverse impact on its primary aluminum business due to tariffs, with a quarter-over-quarter increase of about $90 million [1] - The tariffs were raised from 10% to 25% in March 2025, eliminating exemptions for Canadian aluminum imports, which is critical as 70% of the aluminum produced in Canada is sold to U.S. customers [1] - The company expects to incur annual costs of $400 million to $425 million due to these tariffs, despite benefiting from higher premiums in the Midwest [1] Tariff Impact - The company is not significantly affected by tariffs on aluminum products and most input materials from Canada and Mexico due to compliance with the USMCA [2] - However, high reciprocal tariffs on alumina and other raw materials are expected to increase input costs by $10 million to $15 million annually due to a lack of suitable alternative suppliers [2] Market Dynamics - In 2024, the U.S. imported approximately 4.2 million tons of primary aluminum, with 70% (2.9 million tons) sourced from Canada [3] - Even if all idle smelters in the U.S. were restarted, there would still be a shortage of 3.6 million tons of aluminum, indicating a significant reliance on Canadian aluminum imports [3] - The company has the capability to adjust its global smelting mix and supply chains based on trade policies and economic conditions [3] Financial Projections - The company expects a total loss of $100 million for the year, factoring in the higher Midwest premium and the costs associated with tariffs [6] - The Midwest premium is currently lower than the company's expectations, attributed to market sentiment and pre-tariff inventory accumulation [6] - The company estimates that the reasonable Midwest premium under the 25% tariff should be between $880 and $990 [17]