Decarbonization
January 27, 2026
AMU Community Chat: LME and Midwest premium highs and tariff fatigue
Written by Stephanie Ritenbaugh
The London Metal Exchange (LME) is soaring into the $3000s, with some analysts predicting prices could reach $4,000 this year.
Factoring into those highs are issues such as China’s production cap being tested and strong prices for metals like copper, which supports substitution opportunities for aluminum, according to aluminum experts and AMU contributors Greg Wittbecker and Edward Meir. Wittbecker and Meir spoke on a wide range of topics during a Community Chat on Thursday, Jan. 22. A recording is available for subscribers here.
“For the last 20-25 years, the LME has more or less been held hostage by a Chinese market that has been constantly increasing production at very low capital costs,” Wittbecker said. “Now that the Chinese are bumping up against their production cap, the market is trying to figure out what’s an appropriate incentive price to try to get non-Chinese production built.”
“Prices that are over $3,000 are the first serious attempt to try to say, ‘OK, what’s it going to take to get a new smelter built in Finland or India or Venezuela,’” he said.
Commodities analyst Meir noted the rise in copper, silver and tin prices that are “just well over what anybody thought at the beginning of last year.”
“Aluminum has been to $4,000 before, so it’s not an outlandish number, but I think the premiums are going to really be more of an issue,” Meir said, noting that the Midwest premium is trading just shy of $1.00 per pound as of Jan. 26. “That’s $2,200 – 60% of the price is already in the premium.”
“Consumers are getting it from both sides,” Meir said. “They’re seeing LME prices going up, although much slower, and they’re seeing no relief from the premiums.”
As for Europe, the premiums, if anything, are undervalued but will start to be pulled up because of smelter outages at Mozal Aluminum in Mozambique and Century Aluminum’s Grundartangi smelter in Iceland.
Meanwhile, the Carbon Adjustment Border Tax (CBAM) is kicking in this year. That could result in higher premiums pulling more metal from the Middle East and tightening the US market further, he said.
Midwest premium
Asked whether the market could see demand destruction from higher Midwest premiums, Meir said it depends on the product.
“I don’t think beer cans are going to see a plunge in sales, but certainly some of the other things could be impacted, especially if you see some substitution with steel in some cases.”
There has been some speculation about substituting steel for aluminum in products like automobiles, but there has not been a widespread move.
Wittbecker added that automakers think in terms of three- to five-year cycles, and “the critical risk period for substitution in auto comes when some of these big platforms or production runs are coming to the end of a cycle.”
“If a given model is earmarked for redesign, say, in 2026, that’s when you start to worry that there could be a structural change from aluminum to steel. But I don’t think that’s an imminent threat,” Wittbecker said, noting that it would be more of a concern 2027-2029.
Trade tensions unabated
President Trump has continued to threaten tariffs. Just a few recent examples include levies on several European countries for their opposition to Trump’s plans for the US to seize control of Greenland, as well as on Canada for striking a trade deal with China.
It has been a cycle of tariffs threatened, walked back, reinstated or eliminated, and some of the specifics would affect aluminum markets more than others.
But the impact on the broader economic climate is hard to ignore.
“It’s more about the broader sort of environment in which you’re operating, with the volatility and not knowing what comes next,” Wittbecker said. “Every day the market comes in with a certain degree of tension, like, ‘Who’s going to get hit next?'”
Meir said it is like playing “Russian roulette with the economy, just throwing numbers out whenever he is upset with somebody or a policy or something like that, and it mucks up the trade flows that naturally take place.”
On Nov. 5, the US Supreme Court heard arguments on whether Trump acted within his executive power when he imposed tariffs through the IEEPA mechanism. The IEEPA tariffs, also nicknamed “liberation day” or “reciprocal” tariffs, are separate from the Section 232 tariffs, which cover steel and aluminum products but not some raw materials.
While that case is still being decided, Meir said it will not directly impact aluminum and steel markets because those metals face tariffs under different mechanisms.
“I think we’re going to have to live with these tariffs, tariff dramas and high premiums for much of 2026,” Meir said.
The full conversation, which also included further discussion on aluminum production in Indonesia, aluminum substitution and scrap spreads, can be found here.
