- Aluminium producers alter trade routes, cut costs fast
- Tariffs pressure margins despite rising US premiums
The doubling of US Section 232 aluminium tariffs to 50% in early June has triggered a swift recalibration of supply chains, cost structures, and investment priorities across leading global producers. While regional premiums rose in response, they fell short of offsetting the margin impact — pushing companies such as Alcoa, Rio Tinto, and Norsk Hydro to respond with asset optimisation, volume redirection, and cost discipline to navigate intensifying trade headwinds.
The US tariff hike — effective 4 June — reshaped cost curves almost overnight. Section 232 duties had already increased to 25% in mid-March, but the June escalation further distorted trade dynamics. While the US domestic premium rose to a record $0.66/lb by late Q2, it provided only partial relief.
Alcoa reels under tariff shock as profits fall
Alcoa reported Q2CY’25 revenue of $3.018 billion, down ~10% from Q1. Net income fell to $164 million, above Q1’s $20 million but significantly below the $548 million in Q2CY’24. Adjusted EBITDA plummeted to $313 million, from $855 million a year earlier, driven by lower realised prices and surging costs.
Tariffs played a central role: Alcoa incurred $115 million in duties on Canadian imports, up from just $20 million in Q1. In response, the company redirected Canadian tonnage to Europe and Asia, halted high-cost restarts, divested non-core assets (including a Saudi JV stake), and intensified cost-cutting efforts. Lobbying efforts for tariff exemptions are ongoing.
Rio Tinto absorbs $321 million in tariffs, re-routes volumes
Rio Tinto — responsible for nearly three-quarters of Canada’s aluminium exports to the US — faced $321 million in tariff costs in H1CY’25. Roughly 723,000 t of aluminium crossed the border in that period, amplifying exposure to the 50% tariff.
Executives criticised the policy as “market-distorting,” claiming it inflates domestic costs without strengthening US competitiveness. While US domestic premiums offered partial compensation, profitability remained under pressure. Rio began re-routing volumes to Europe and Asia, absorbing longer transit times and higher logistics costs.
The group also recalibrated US pricing strategies — raising domestic prices where possible without eroding demand — and is reassessing capital allocation for its North American operations. Further guidance is expected in its upcoming half-year results.
Hydro gains short-term edge but cuts costs cautiously
Norsk Hydro, with lower direct US exposure, delivered a strong Q2. Adjusted EBITDA rose 33.4% y-o-y to NOK 7.79 billion, supported by higher aluminium and energy prices. Net profit also increased, helped by efficiency measures and stable upstream performance.
Hydro benefitted indirectly from the trade disruption, capturing demand redirected to domestic sources amid tighter North American supply. North American extrusions demand fell 1% y-o-y but rose 5% from Q1, signalling partial recovery.
Despite the strong quarter, Hydro adopted a cautious forward stance. Capex for 2025 was trimmed by NOK 1.5 billion (~$147.5 million), external white-collar hiring was frozen, and over 100 jobs are being cut, mainly in extrusions. The group remains wary of prolonged trade friction and is preparing for additional supply-chain shifts if tensions escalate.
Trade tensions realign market fundamentals
The sharp escalation in US aluminium tariffs forced producers to rapidly recalibrate their strategies across multiple fronts. To preserve liquidity, companies are accelerating asset optimisation and divesting non-core operations. Trade flows are being rerouted to bypass high-duty corridors, often at the cost of longer transit times and higher logistics expenses.
Meanwhile, firms are tightening cost structures through capex cuts and workforce reductions, particularly in non-core divisions. At the policy level, producers are ramping up lobbying efforts to secure exemptions or long-term relief.
While a spike in regional premiums has provided some temporary pricing support, aluminium majors remain concerned about the risk of demand destruction if tariffs persist. With US-EU trade talks still unresolved and the threat of retaliatory measures looming, the broader market outlook remains clouded by uncertainty.
Leave a Reply