Looming aluminum tariffs have put U.S. makers of everything from cans to cars on edge. But as long as they’re willing to pay enough of a premium, the metal is likely to continue flowing across the northern border.

Aluminum shippers are engaged in a delicate dance — warning about the disruptive effects of tariffs while at the same time trying to ease customer concerns. The head of Rio Tinto PLC, the top supplier of aluminum to the United States, took the unusual step last week of presenting earnings from the firm’s Washington offices. That’s after metal buyers from Coca-Cola Co. to Ford Motor Co. said tariffs are at the very least causing uncertainty or at worst could “blow a hole” in their industry.

Despite the hand wringing, metal continues to arrive normally into the more than US$11 billion U.S. market, with no immediate plans by producers in Canada to shift tons elsewhere, according to people familiar with the matter.

U.S. demand is such that it doesn’t make sense for Canadian shippers to shift tons elsewhere as they wait to see if President Donald Trump follows through and alternative markets in Europe are already well supplied.

“Fundamentally nothing has changed because the deadline first kicks in in March,” Rio Tinto chief executive Jakob Stausholm said in an interview. “People of course are asking themselves should there be less or more Canadian aluminum — should we be sending more aluminum to Europe rather than the U.S.”

Stausholm said the answer depends on how the tariffs are implemented, saying “in the wild and unlikely” scenario that the rest of the world received exemptions except for Canada, it would make sense to ship those tons elsewhere. But traders say it’s more likely that everyone will receive the same tariff, meaning the tons wouldn’t be diverted.

Rio Tinto is telling buyers that, in the event of a 25 per cent tariff, it would only stop selling the metal to U.S. customers if a regional premium goes below about 45 cents U.S. a ton, said a person familiar with the matter. Anything less than that would make selling to U.S. consumers unprofitable, said the person, who asked not to be named because talks are private.

Another person with knowledge of the matter said Rio is expected to honour its existing customer contracts regardless.

The so-called U.S. Midwest premium, the amount added to global benchmarks to deliver aluminum to that region, approached 41 cents a pound on Friday, up about 75 per cent this year. The surge reflects the regional increase in the price of aluminum as traders anticipated Trump to implement the 25 per cent tariff on all imports of the metal. It was 21 to 22 cents U.S. before Trump won the election.

Still, pricing in a 25 per cent tariff would push the premium above 50 cents U.S., said Greg Wittbecker, a former Alcoa Corp. executive, who now covers the industry as a consultant. The fact it’s about 20 per cent below that level indicates the possibility of Trump softening terms, he said.

Suppliers in Canada such as Rio Tinto and Alcoa would be among the most impacted by the tariffs — scheduled to begin March 12 — as the neighbouring nation produces about 70 per cent of total aluminum consumed in the U.S., according to Harbor Intelligence research. Rio Tinto and Alcoa, the largest suppliers to the U.S. market, were vocal opponents of the 10 per cent duty Trump imposed on Canadian aluminum imports during his first term in 2018.

Their lobbying back then, in conjunction with the U.S. Aluminum Association, helped secure an exemption for Canada that has remained in effect. Concerns have returned as Trump’s latest tariff announcement included a declaration that he would rescind all exemptions.

The exemption became a windfall for Canadian smelters as they were able to sell aluminum at a higher premium while their customers didn’t have to pay the 10 per cent duty that imports from other nations would incur. A 25 per cent tariff without an exemption would thus remove a profitable advantage. Either way, American buyers largely are anticipating they’ll have to soon pay a higher price for aluminum.

North American buyers will “bear the price” as costs will go up for everyone, according to Jean Simard, who heads the Aluminium Association of Canada. And with weaker economies across Europe and Asia, those Canadian tons are unlikely to go elsewhere.

“The economy in Europe is not doing well, and you have India, the Middle East, Southeast Asia and even Europeans shipping metal to Europe, which is the alternative market for Canadians,” said Jorge Vazquez, the managing director of Harbor Intelligence. “So I don’t expect the flows to change if there’s a tariff.”

Rio Tinto declined to comment. Alcoa deferred comment to The Aluminum Association.

“We want and need to open new smelting capacity in the United States, which is President Trump’s intent,” Charles Johnson, the association’s president wrote last week in a post on LinkedIn. “Though – and this is critical – for our industry’s growth, and for national security, we must maintain tariff-free access to aluminum from Canada.”

Bloomberg.com