The Pentagon's HPA headache is part of a broader problem. Restoring U.S. aluminium production capacity is a long-term task. But the market needs more metal now.
The impact of tariffs on domestic production has been modest so far.
Century has reactivated 50,000 tons of annual capacity at its Mount Holly smelter in South Carolina, returning the plant to full-capacity production.
Magnitude 7 Metals is reopening a 1970s-era smelter in Missouri after closing it in 2024. The first 75,000-ton-per-year potline is targeted for restart by the end of the year.
There has been lots of investment in recycling capacity, a section of the supply chain that saw job growth exceed 20% between 2024 and 2026, according to the Aluminum Association.
But the domestic supply gap remains large. U.S. import dependence was 60% last year, according to the U.S. Geological Survey.
The stress is manifest in the U.S. Midwest Premium, which is the surcharge over the London Metal Exchange price paid by U.S. buyers of physical metal. The CME spot premium AUPc1 is $2,467 per ton, which is some $850 per ton higher than the implied 50% tariff level.
The loss of production in the Gulf has triggered a scramble for metal globally, and U.S. buyers find themselves in competition with both Europe and Asia for spare units.
The Trump administration has just put another aluminium smelter incentive on the table in the form of a reduced 25% import tariff for anyone building, expanding or refurbishing domestic smelter capacity.
Canada, on the other hand, won't get a similar anticipated reduction after trade talks broke down, leading to tariff escalation rather than de-escalation.
The country remains the largest supplier of primary aluminium to the U.S. market, although it has directed more volumes to Europe in recent months.
But even if Canada could and wanted to export its entire production over the border, it still wouldn't be enough to fill the U.S. shortfall, according to analysts at Morgan Stanley. The marginal import ton would still be subject to a 50% tariff rate, and the Midwest premium would reflect that.
However, Canada does offer one short-term solution to U.S. military planners' aluminium headache, as the DLA report points out.
If the U.S. needed to surge aluminium production during a large-scale conflict, a memorandum of understanding between the two countries includes a special arrangement under which Canada would prioritize U.S. defense purchases.
The Pentagon may have to ask nicely, though.
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