This time of year is always special, but also always busy. It's not only hectic personally (shopping, holiday parties, etc), it’s hustling and bustling professionally. Making the final pushes for the current year while lining out and finalizing deals for the coming year definitely makes the weeks between Thanksgiving and New Year’s just fly by. I will be trying to soak in more of the season this year and hope you do the same.
Aluminum pricing has remained relatively flat over the month of November, give or take a couple of pennies. And while the markets aren’t doing anything crazy, there are definitely some major headlines out there that are impacting things. The biggest being all the tariff talk from President-elect Trump. He’s vowed to impose an additional 10% tariff on goods from China and 25% tariffs on all products from Mexico and Canada when he takes office late January. These tariffs are aimed at forcing these countries to take a stronger stance on curbing migrants and illegal drugs that are flowing into the US – a promise Trump made during his presidential campaign.
Let’s first unpack the North America impact. While markets seem skeptical that these tariffs on Canada and Mexico will materialize, the impact if they do would be substantial. Roughly 85% of the primary aluminum utilized in the US comes from Canada and a 25% tariff would result in approximately 30c of additional cost to source P1020 domestically. The tariff on value added aluminum products (VAPs) like billet, slab, and wire rod would drive those upcharges as well. In 2024 about 65% of the US VAPs came from Canada.
Internationally, fear of retaliatory tariffs has drastically slowed exports from the US to China as industry vets still have PTSD from when this happened in Trump’s first term. This has taken some wind out the sails of China relaxing their aluminum scrap import restrictions in mid-November, a move to clear obstacles that stood in the way of feeding scrap to all the new aluminum melting capacity (15 million metric tons per year) that has been invested into China and will be coming online over the next 24 months. Another thing to keep an eye on from an export perspective is the upcoming longshoreman’s strike. If you recall, this was a big to-do in October that shut down 36 ports from Maine to Texas for 72 hours until they agreed to return to work and extend the deadline out to January 15th for the 2 sides to agree to terms on pay and use of automation. We are less than 45 days out with no positive signs to report.
Domestic demand for aluminum at the mills remains spotty – some segments like can sheet and common alloy remain tight while others like aerospace, automotive, and extrusion have been softer. That said, even in the weaker market segments there are spot needs that are popping up and I’m starting to hear some optimism for next year. This seems to align with the Fed’s Beige Book which reported moderate growth with businesses more hopeful that demand will pick up in the coming months. The wild card again here is the change in administration and what comments regarding tariffs are merely bargaining chips versus items that fully come to fruition. Upcoming holiday/weather transportation and delivery issues coupled with the seasonal downturn in peddler grade scraps will likely intensify competition for available units in the short term.
Have a great holiday season! If you need any pricing, or have questions, or topics for this segment, please contact me at michael.anderson@schupan.com or 440-813-6325.
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