The premium for P1020A climbed higher on Monday due to supply concerns arising from the 10pc tariff to be levied on Canadian material starting August 16.

 

The weekly Davis Index premium for P1020A increased by 2.2¢/lb to 12.2¢/lb delivered US under the three-month LME Aluminum contract on Monday, while the 6063 billet premium was flat at 6¢/lb delivered under the same LME contract. 

 

Market participants expect the current tariffs are just the beginning and anticipate that the premium for P1020A to reach as high as 16-18¢/lb—a level that would max out US capacity and allow imports into the US to be competitive even with the added cost of tariffs. 

 

The three-month LME aluminum contract closed on Monday, $1,766/mt up by $48/mt from $1,718/mt on August 3.

 

Canada has reduced the amount of material they offer into the US in recent months to stay under the radar and prevent any new tariffs on primary aluminum entering the US.However, trade officials from the US cited the increase in Canadian exports of primary aluminum into the country as the driver for reinstating tariffs. 

 

The US had removed the 10pc tariff during negotiations of the United States Mexico Canada Agreement (USMCA) but retained the right to re-implement the measure if imports spiked. The suspension of duties started in May of 2019, and Canadian imports into the US saw more than an 85pc increase in tonnages as of June 2020. 

 

Market sentiments are mixed on the new measure and its effectiveness in the US market, with consumers opining that most US aluminum users are mid to downstream aluminum product makers.  New tariffs will only raise the cost of raw material, making the US less competitive in the global marketplace.

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