Cutting Canada tariffs alone won't flatten US aluminum premium, Alcoa says

Sept. 10 (Reuters) - The steep premium paid for aluminum in the U.S. will not drop significantly even if Washington halves the tariffs on metal from neighboring Canada, because imports from other countries will still be needed, Alcoa's finance chief said on Thursday.

The price U.S. consumers pay on top of the London Metal Exchange benchmark for physical aluminum, known as the Midwest premium, is high at $1.09 per lb, or $2,403 per metric ton, but has eased from a record $1.19 in June on hopes the 50% import tariff could be halved for Canadian material.

Speaking at the Jefferies Global Industrials Conference in New York, Alcoa Chief Financial Officer Molly Beerman noted that the U.S. needed to import around 4 million tons of aluminum per year and Canada could only supply 3 million tons of that.

"With the U.S. still needing to incent the import of a million tons, even if we were to have a favorable rate with Canada, we don't see Midwest dropping significantly," Beerman said. "It might come off a little bit, but we wouldn't see it returning to pre-tariff levels."

If there is tariff relief or waivers for other trade partners — such as Japan, South Korea or Europe — and the last 1 million tons is covered, "then you can expect the Midwest premium to reduce in response to essentially wipe out the tariff benefit," Beerman said.

Pittsburgh-based Alcoa produces around of aluminum in Canada and is paying more than in tariffs to bring most of it into the U.S., Beerman said. "However, the Midwest is fully compensating us for that, as well as returning as margin because of the tightness in tons."