Week in Review: A market on edge

Written by Gabriella Vagnini

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What happened this week:

The White House signed a new Executive Order (EO) raising the aluminum tariff from 10% to 25% on all countries importing aluminum into the U.S., effective March 12, 2025. The details on which specific products are impacted are still pending in the Annexes.
Midwest Premium (MWP) surged to 38.85¢/lb this week, jumping nearly 10¢ in just a few days as traders held back and liquidity remained tight. This rapid increase is putting pressure on buyers, with some wondering how much further it can go.
The LME aluminum cash to 3-month spread remains in a steep backwardation (at $13b per mt), reinforcing short-term tightness in the physical market.
Heavy producer forward selling on the LME in January suggests producers don’t believe these high prices would last. If they expected further upside, they wouldn’t be hedging at these levels.
Industry M&A activity is heating up, as companies evaluate strategic acquisitions and carve-outs in the secondary aluminum sector. A major failed sale of Real Alloys to Hydro opened up the opportunity of dividing the asset, with some players looking to bring scrap supply in-house and others eyeing expansion opportunities. The rumor mill is that Novelis and also EGA have shown some interest.
We spoke with ADI and published an article on their growing role in the market. With new domestic capacity coming online, they are focused on securing scrap supply and navigating shifting trade policies. Their new scrap-fed facility is set to commission by late March, further adding to the evolving U.S. landscape. They are definitely one to keep an eye on.

Why it matters:

With MWP already near $0.40/lb and some predicting a move to $0.50/lb, buyers are questioning how much higher it can go before correcting. Historically, when the forward curve gets this high, a pullback was around the corner.
Tariffs are adding to the uncertainty, but most market participants don’t expect the 25% rate to stick long-term. The consensus is that it will settle back at 10%, meaning MWP is already factoring in those costs.
The price spike is squeezing rolling mills and manufacturers relying on prime aluminum, while extruders could gain an advantage if semis get tariffed-a segment that currently makes up 15-20% of the U.S. market.
Novelis saw net earnings drop 9.1% ($110M), blaming higher scrap costs. Auto and specialty shipments were lower, but can stock demand stay strong, and they’re investing in new scrap processing tech to improve sourcing. Novelis did say that they are still on track for commissioning second half of 2026. Said to produce 600,000 tons of finished aluminum products annually.
Ongoing consolidation in the aluminum market is driving speculation about which players will acquire strategic assets, with interest in secondary processing and scrap integration gaining traction. Some companies may see this as the right time to align supply chains internally, but not all major shareholders are on board with potential deals.

What to watch next:

MWP Behavior: Will traders step back in and start selling, adding liquidity to the market?
Import Adjustments: As more aluminum arrives under the new tariff structure, will the premium react?
Demand at prices: If buyers push back at these higher levels, a correction could follow.
Tariff Developments: If the 25% tariff holds, it could extend MWP’s strength, but if it’s lowered back to 10%, speculative pressure could ease.
Smelter Restarts: Midwest premium increases equal a $322.98/ton revenue boost, but power costs remain a challenge. Century and Alcoa have idled capacity and are waiting for cheaper electricity to justify restarts.
Trade Flow Shifts: European premiums are dropping, Rotterdam ingot down $25/t and duty-paid premium down another $35/mt. If U.S. tariffs hold, more Canadian metal could end up in Europe.
LME Movement: Despite the tariffs, LME 3-month slipped to $2,615/mt, down 2% from its earlier peak of $2,668/mt. U.S. inflation at 3.3% y/y means the Fed isn’t likely to cut rates soon.