Key Moments
- Commerzbank’s Thu Lan Nguyen highlights that U.S. aluminum supply remains tight more than a year after import tariffs were introduced.
- A planned smelter in Oklahoma has been halted on environmental and ownership issues, while overall U.S. aluminum production has fallen.
- High prices and elevated import premiums have weighed on demand, raising the risk that the market will rebalance mainly through demand destruction.
Persistent Supply Tightness Despite Tariffs
Commerzbank’s Thu Lan Nguyen reports that U.S. aluminum supply remains constrained more than a year after import tariffs were implemented. A key potential source of new output – a proposed smelter project in Oklahoma – has been blocked due to environmental concerns and questions over ownership, limiting prospects for additional domestic capacity.
The bank notes that measures intended to support domestic production have not yet delivered visible relief in the U.S. market, where supply conditions stay tight and prices remain elevated.
Domestic Production Declines and Scrap Imports Rise
According to Nguyen, domestic aluminum output has not only failed to expand, it has actually decreased. Citing data from the U.S. Geological Survey (USGS), Commerzbank points out that U.S. aluminum production dropped last year, even in the presence of tariffs meant to bolster the industry.
This pattern has been observed in both primary and secondary aluminum production. At the same time, imports of aluminum scrap – which are not subject to the tariffs – increased significantly, suggesting that market participants have turned to tariff-exempt material to help fill the gap in supply.
| Aspect | Trend/Status |
|---|---|
| Domestic primary production | Declined last year |
| Domestic secondary production | Also declined last year |
| Aluminum scrap imports | Increased significantly (tariff-exempt) |
| Oklahoma smelter project | Blocked on environmental and ownership grounds |
Price Pressures and Risk of Demand Destruction
Commerzbank underscores that demand has been negatively affected by the elevated price environment. High aluminum prices and persistently steep import premiums have dampened consumption in the United States.
Against this backdrop, Nguyen warns that the tight U.S. aluminum market may ultimately move toward balance not through a substantial expansion of domestic capacity, but rather via weaker demand. As stated in the report, “Given the persistently high import premiums, there is a significant risk that the strained US market will be relieved primarily by demand destruction.”
Tariffs and Capacity Outlook
The bank stresses that, so far, tariffs have not delivered the intended boost to large-scale investment in new U.S. smelting capacity. As noted, “Even more than a year after the introduction of US import tariffs on aluminium, there is little sign of relief in the supply situation in the United States.”
Commerzbank concludes that “a significant expansion of production capacity in the US still appears to be a long time coming,” even as market participants grapple with tight supply conditions and weakening demand.
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