By Melanie Burton
MELBOURNE (Reuters) -U.S. companies will look to the Middle East and India for more aluminium and to Chile and Peru for copper as they seek to circumvent sweeping tariffs imposed by U.S. President Donald Trump, according to industry sources.
Trump's orders for additional levies of 25% on imports from Mexico and most goods from Canada, as well as 10% on goods from China, have been light on detail. But they are scheduled to kick in on Tuesday and have jolted markets.
U.S. users depend on aluminium producers in Canada such as Alcoa (NYSE:AA) and Rio Tinto (ASX:RIO) for more than half of their imported needs and will look for alternative supply, analysts said.
Important for the transport, packaging and construction sectors, the United States imported 5.46 million metric tons of aluminium products in 2023, U.S. Commerce Department data shows.
Canada accounted for 3.08 million tons, or 56% of that, the data showed.
"Canada will divert some aluminium from (going to) the U.S. to other regions, so for the U.S. to encourage aluminium from other regions, they are going to have to pay a bit more," said analyst Glyn Lawcock from Sydney investment bank Barrenjoey.
That will be reflected in physical premiums, which include costs such as handling and shipping, and which are paid on top of exchange prices to receive delivery of physical metal.
The imposition of tariffs represent a "significant upside risk to the U.S. Midwest premium this year", ING analysts wrote in a note.
Prices of primary aluminium in the U.S. are based on the London Metal Exchange benchmark plus the Midwest premium, which jumped to 2.95 U.S. cents a lb or $650 a metric ton on Friday. That reflects a gain of more than 10% since the start of the year, and is the highest since July 2022.
Rio Tinto declined to comment. Alcoa's William Oplinger said on an earnings call last month that Alcoa could reroute its Canadian material to Europe, and he expected more Middle Eastern metal and potentially Indian metal to come into the U.S. market.
The United Arab Emirates and Bahrain are both major aluminium producers.
Sources at two aluminium producers said they were waiting and monitoring Trump's announcements, with one adding they had "no intention to change yet".
A lawyer said he would advise clients to be cautious in case the tariffs were withdrawn and to prepare to sell into markets beyond the U.S., in case Trump expands tariffs to other jurisdictions.
Across other metals, redirection of trade flows could soften the impact of the tariffs, with greater U.S. imports from alternative key sources including Peru and Chile for copper and silver, and Switzerland for gold, Citi analysts wrote in a note.
Combined, Canada and Mexico represent around half of U.S. domestic silver consumption and around 10% of U.S. copper consumption, equivalent to some 147,000 metric tons of copper, it said.
"This announcement also raises the likelihood of further tariff measures... while lowering expectations for exemptions for U.S. free-trade partners," the Citi analysts said, citing the potential for a universal U.S. import tariff on specific metals such as copper, aluminium or steel.