Understanding aluminum imports: What are your options?

Some companies will just eat the tariff and move on, but for those looking to manage costs and cash flow, there are still ways to stay competitive. Let’s break down some of the options, their risks, and what makes sense in this shifting landscape.

Option 1: Direct import – Pay everything upfront

This is the most straightforward approach. The company buys the aluminum, ships it in, and pays all costs immediately, including the 25% tariff.

Pros

• Immediate ownership – The metal is now fully owned and ready to use immediately.
• No market dependency – Avoid shifting storage rates or policies in trade zones.

Cons

• High upfront costs – Tying up significant capital.
• No cash flow flexibility – Paying everything upfront reduces working capital that could be used for other business needs.
• Price Risk – Aluminum prices can shift between when you buy it, process it, and finally sell it (usually around three months or more), which can eat into margins if prices drop in the meantime.

This could be the right choice for companies that need metal now and don’t mind locking in the cost. But for those looking to manage cash flow more strategically, other options exist.

Option 2: Foreign Trade Zone (FTZ) – Holding off on tariff costs

Instead of paying the 25% tariff the moment aluminum crosses the border into the U.S., a company can bring it into an FTZ in the U.S. and hold it there until they actually need it.

Pros

• Cash flow flexibility – The tariff only kicks in once it leaves the FTZ for U.S. consumption or leaves back out of the U.S.
• Export option – If the aluminum is re-exported, it never pays U.S. tariffs at all.
• Processing opportunities – Some companies can alter aluminum slightly in FTZs to shift classification and lower duty rates.
• Better than In-Bond – The difference between FTZ and in-bond is that once the metal reaches its in-bond designation, duties must be paid. In-bond is a middle ground strategy, good only for short-term tariff deferral but not as flexible as an FTZ.

Cons

• Additional storage and logistic costs – You will have to pay storage costs and additional logistic costs, depending on where you store the metal.

This setup is good for cash flow. Instead of tying up millions in tariffs immediately, companies keep that money available for other business needs until they’re ready to bring the aluminum into the U.S. market. This does come with an additional cost but could help mitigate the risk from your purchasing cost to your sale cost, which typically is a minimum three-month period. Also, depending on the exact write-up, if the tariffs are removed, you could possibly not have to pay the tariff or if it goes up, you might be grandfathered into the old tariff rate.

Option 3: LME warehousing – Liquidity and market flexibility

Another route is storing aluminum in a London Metal Exchange (LME) approved warehouse in the U.S. When companies do this, they have two key options:

A) Store the metal without warrants

• The aluminum sits in an LME warehouse but remains under the company’s ownership.
• Storage fees apply, but there’s no tariff until the metal physically exits the LME warehouse into the U.S. Note- If the metal exits the warehouse directly out of the U.S., it will not be subject to the tariff.
• You can negotiate rebates, rent share or freight allowance with the warehouse. Some upfront or monthly, depending on your agreement with the warehouse. As in life, all is negotiable.

B) Warrant the metal on the LME

• Instead of holding onto the metal, or if the market works against you, you will have the option to convert it into an LME warrant, meaning, it’s now officially part of the LME system.
• This allows you to sell the warrant, turning aluminum into cash.
• Later, if they need metal again, you can buy back LME warrants or source new material elsewhere.

Pros

• No Section 232 tariff unless the metal enters the U.S.
• Strategic timing flexibility to avoid bad market conditions.
• Ability to sell metal on the LME and keep cash liquid.

Cons

• Storage fees add up over time.
• Market risk – If LME prices drop, holding metal becomes a liability.

For companies that don’t need immediate delivery, LME storage can be a powerful hedge against tariffs and volatile market conditions. But keep in mind you would need to set up an account with an LME broker.

LME storage also allows companies to strategically time when they take delivery, which can be useful for tariff planning and supply chain management.

In the U.S. there are surprisingly 44 LME warehouses. List of cities with LME warehouses:

• Baltimore, MD (8 warehouses)
• Chicago, IL (5 warehouses)
• Detroit, MI (6 warehouses)
• Los Angeles, CA (1 warehouse)
• Mobile, AL (6 warehouses)
• New Orleans, LA (13 warehouses)
• Owensboro, KY (2 warehouses)
• Toledo, OH (3 warehouses)

LME warehousing – Fact checking the myths

Now I know what you’re thinking, another merry-go-round of metal and the MWP skyrockets. Luckily the LME is all over it, at least when it comes to LME warehouses and their merry-go-round tactics.

✅ Queue-based rent capping (QBRC): warehouses can’t collect unlimited rent on delayed shipments. after a delivery request is made, rent is capped, discouraging warehouses from holding metal hostage.
✅ Increased transparency: LME publishes warehouse data on stock levels, storage activity, and delivery queues so buyers and regulators can track inventory flows in real-time.
✅ Enforcement & oversight: LME now closely monitors warehouse activity to prevent operators from repeating past storage tactics.
✅ Ongoing reforms: even in 2025, LME is still tweaking its rules. they’re looking at requiring warehouses to deliver a set percentage of metal each month and banning rent-sharing deals that encourage stockpiling.
✅ Less concentration in one warehouse: after 2012, LME spread inventory across multiple locations so no single operator could dominate the market and control the supply chain.

Option 4: Hedging – Locking in aluminum prices

Aluminum prices move constantly, and no company wants to get caught buying at the wrong time. That’s where hedging comes in. Instead of leaving it all up to chance, a company can use LME futures contracts to stabilize their costs.

Pros

• Lock in aluminum costs at predictable rates. If you think prices are going up, you can lock in today’s price so you’re not paying more later.
• Reduce exposure to sudden price spikes in LME or the MWP.
• Companies that rely on aluminum for production often hedge so they know exactly what their material costs will be months in advance, no surprises.
• No LME warehouse fees or LME warranting concerns.

Cons

• Requires market knowledge – Bad hedging strategies can increase costs rather than reduce them.

Hedging doesn’t change how you store or import the metal, but it gives you control over price swings, so you’re not forced to buy high just because you need inventory. Remember, hedging is only to mitigate your risk against your physical. hedging isn’t always profitable; it’s about mitigating your risk.

What’s the best option?

It depends on your company’s financial position, risk tolerance, and operational priorities.

• Need immediate aluminum with no storage delays? → Direct import
• Want to delay tariff payments and manage cash flow? → Foreign Trade Zone (FTZ)
• Looking for liquidity and market flexibility? → LME warehousing with or without warrants
• Concerned about price volatility? → Hedging

Companies use different strategies based on their role in the supply chain. A producer might hedge price risk, while a manufacturer could leverage an FTZ to delay tariffs until production requires the material. For extruders who rely on just-in-time supply, FTZs may be an option worth exploring, while rolling mills with long lead times could benefit from LME storage.

At the end of the day, the goal isn’t to avoid costs, it’s to manage them efficiently while keeping the business flexible in a volatile market.