Tariff Effects Reveal Vulnerabilities in the Aluminum Market
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Aug 29 2025
0mins
Source: Benzinga
Impact of Tariffs on the Aluminum Supply Chain
- EU's Response to Tariffs: The European Union is under pressure from a 50% tariff imposed by the U.S. on finished aluminum, prompting Brussels to prepare emergency measures to protect its €40 billion aluminum industry, which directly employs around 250,000 people and supports an additional 1 million jobs.
- Scrap Metal Exemption Issue: While finished aluminum is heavily taxed, scrap metal shipments to the U.S. are exempt, leading to a significant flow of scrap away from European recyclers, which is critical for their operations.
Consequences for European Recycling Plants
- Operational Challenges: European recycling plants are facing shutdowns and reduced capacity due to the lack of scrap metal, with industry leaders warning that they have only weeks to address the situation before it becomes critical.
- Potential Levy on Exports: There is opposition from scrap dealers against a proposed levy on exports, but EU officials indicate that such measures may be necessary to maintain competitiveness in the aluminum sector, which is essential for low-carbon technologies.
U.S. Market Dynamics
- Surge in Aluminum Prices: Following the tariffs, the Midwest premium for aluminum in the U.S. has increased by 81%, with U.S. buyers now paying approximately $4,200 per ton compared to the global price of around $2,600 per ton.
- Adaptation by Major Producers: Companies like Rio Tinto are adjusting their strategies by purchasing aluminum from the U.S. spot market instead of exporting from Canada, as tariffs have made traditional shipments unprofitable.
Broader Industry Concerns
- Decline in U.S. Smelters: The U.S. aluminum industry has seen a drastic reduction in operational smelters, now only four remain, raising concerns about the industry's ability to meet domestic demand amidst rising prices.
- Consumer Price Impact: The Can Manufacturers Institute has warned that increasing aluminum costs could lead to higher prices for canned goods, posing risks to food supply chains.
- Global Market Reshaping: Analysts note that the tariffs are altering global aluminum flows, particularly affecting Canadian producers, while the U.S. industry struggles with insufficient domestic capacity and high energy costs for new plants.
Analyst Views on AA
Wall Street analysts forecast AA stock price to fall over the next 12 months. According to Wall Street analysts, the average 1-year price target for AA is 46.00 USD with a low forecast of 33.00 USD and a high forecast of 58.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
10 Analyst Rating
6 Buy
2 Hold
2 Sell
Moderate Buy
Current: 63.870
Low
33.00
Averages
46.00
High
58.00
Current: 63.870
Low
33.00
Averages
46.00
High
58.00
About AA
Alcoa Corporation is a vertically integrated aluminum company comprised of bauxite mining, alumina refining, aluminum production (smelting and casting), and energy generation. The Company’s operations are comprised of two business segments: Alumina and Aluminum. The Alumina segment primarily consists of its bauxite mines and alumina refineries, which generally include the mining of bauxite and other aluminous ores, as well as the refining, production, and sale of smelter grade and non-metallurgical alumina. The alumina produced by this segment is sold to internal and external aluminum smelter customers; a portion of the alumina is sold to external customers who process it into industrial chemical products. The Aluminum segment consists of the Company’s aluminum smelting and casting operations along with the Company’s energy production assets in Brazil, Canada, and the United States. It has direct and indirect ownership of 26 operating locations across nine countries on six continents.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
