Midwest Aluminum Premiums: Why the Surcharge Won’t Go Away—and What Buyers Can Do About It
For anyone who buys storefront extrusions, curtain‑wall systems, beverage cans, or even simple billet, one metric has become maddeningly important in 2025: the U.S. Midwest aluminum premium (MWP). In mid‑May, Fastmarkets assessed the duty‑paid premium for standard‑grade P1020A ingot at 39 – 41 ¢ per pound—roughly $860 – $904 per metric ton—almost triple the surcharge European buyers pay in Rotterdam. Compared with December, that is a rise of nearly 70 %. How did a premium that hovered in the mid‑teens two years ago become a line‑item big enough to blow up construction budgets? And what, if anything, will pull it back down?
A Perfect (Tariff‑Fueled) Squeeze
The single biggest accelerant was the White House’s decision in March to hike Section 232 aluminum tariffs from 10 % to 25 % and to apply them to long‑exempt partners such as Canada and Mexico. Traders reacted instantly, booking available tonnage before the levy took effect and pushing the physical surcharge to record territory.
Those tariffs landed on an already fragile domestic supply base. U.S. smelters now cover barely a third of domestic demand; flagship facilities such as Century’s Hawesville plant remain idled, while others cut output because Midwest electricity prices have soared in lock‑step with the region’s data‑centre boom. The mismatch between demand and capacity forces fabricators to lean on imports—imports that now arrive with a 25 % price tag baked in and must travel by congested rail lines from Canadian ports. Each delay or equipment outage adds yet another few cents to the premium.
Finally, there is the financial layer. With price risk exploding, the open interest in CME Midwest Premium futures hit an all‑time high in April, as can‑stock producers and window‑frame fabricators scrambled to hedge. Those basis trades lift the forward curve, and some of that “paper” tightness leaks back into spot offers. In effect, tariffs, tight US production and hedging demand are reinforcing one another.
Will Anything Knock the Premium Lower?
Election‑driven tariff relief? A new administration could scrap or soften Section 232, but Washington rhetoric has turned remarkably bipartisan on the idea that aluminum is a “critical security metal.” Few analysts assign more than a low probability to a rollback before 2026.
Canadian carve‑outs? Ottawa is already lobbying for a steel‑style quota system that would let a fixed tonnage enter duty‑free. If it materialises during the USMCA review this autumn, the premium might retreat 4‑6 ¢—helpful but hardly a return to pre‑2024 norms.
Domestic restarts? Century and Alcoa would love the margin, yet power costs and permitting hurdles mean any restart takes 12‑18 months. Until cheap baseload power re‑emerges in the Midwest, large‑scale potline restarts remain unlikely.
Demand destruction? A surprise global slowdown that crimps auto and beverage‑can output could lop 10 – 15 ¢ off the premium, but that hinges on a macro downturn nobody wants to root for.
Conversely, the risk roster is longer: a maintenance outage at a Québec smelter, a rail strike in the Great Lakes, or a fresh anti‑dumping petition on Asian semi‑finished metal could all push the surcharge north of 45 ¢ in a hurry.
Strategy Playbook for Buyers
1. Fix the premium, float the LME. Most mills will cap the premium for six‑ to nine‑month delivery if the volume is meaningful (≥ 300 t) and you accept LME price floats. That arrangement preserves some downside exposure should global aluminum prices slide while insulating you from Midwest blow‑outs.
2. Hedge forward—but selectively. Today’s December ’25 futures trade around 38 ¢. Buying those contracts while simultaneously selling LME 3‑month metal locks the basis risk for less than 1 ¢/lb of slippage and requires only margin, not cash outlay.
3. Consider tolling via Mexico. Under USMCA, billet or slab imported to Mexico is duty‑free; finishing operations in Monterrey and trucking over the border typically add 3‑4 ¢/lb, well below the tariff‑plus‑premium burden in the U.S. We have a trusted extrusion partner ready to quote within a week.
4. Build a scrap loop. Closed‑loop agreements with façade installers, canners or OEMs can rebate up to 15‑20 % of the purchased metal at the (far more stable) scrap spread, providing a natural hedge against premium volatility.
What This Means for Construction Budgets
Every 10,000 square feet of curtain wall consumes roughly 25,000 pounds of aluminum. At a 40 ¢ premium, that is a $10,000 surcharge—pure tariff‑driven cost that didn’t exist two years ago. If your bids are locked through year‑end without an escalation clause, the entire hit lands on your margin.
Join the Conversation
In today’s Morning Market Pulse inside our Global Trade Intelligence Hub, we’re posing a simple question:
Are you locking in aluminum needs now—or betting on late‑year relief?
If you’ve found creative ways to blunt the Midwest premium drop a comment. Your insights keep this community valuable.
Myles Lewis Alexander
CEO, Far Point Global | Host, Global Trade Intelligence Hub
(Data sources: Fastmarkets premium assessments – May 14, 2025; Reuters tariff coverage – March 5, 2025; U.S. smelter capacity reports; CME Group OI filings.)