Aluminum Squeeze: Tariffs and Power Constraints Threaten US Supply

The US aluminum market is facing a potential squeeze as renewed tariffs on imports collide with existing power constraints, raising concerns about supply and driving up prices. According to Jeff Currie, Chief Strategy Officer of Energy Pathways at Carlyle, the inability to onshore aluminum production due to its energy-intensive nature is a critical factor.

"The question is, can you onshore aluminum production? And the answer is absolutely not," Currie said in a Bloomberg interview. "If you think data centers and AI are power intensive, aluminum smelting's in a whole different world. It's six times more power intensive per dollar revenue than AI data centers. So if you're already power constrained, there's no possible way you're gonna bring all of this aluminum smelting into the United States."

Currie’s analysis comes as President Trump has restored 25% tariffs on aluminum imports, impacting key trading partners like Canada, Mexico, and the European Union. These tariffs, which took effect earlier this month, are already impacting physical market premiums in the US. As reported by Reuters, the U.S. Midwest duty-paid aluminum premium has surged nearly 60% since the start of 2025, reaching above 40 U.S. cents a lb, or nearly $900 a metric ton.

The Aluminum Association has also weighed in on the issue, emphasizing the importance of maintaining a reliable and affordable aluminum supply from Canada. “The aluminum industry supports tariff-free access for Canadian aluminum in the tariffs implemented today,” stated Charles Johnson, president and CEO of the association. He further noted, "The aluminum we import from Canada today is equivalent to the energy generated by at least four Hoover Dams."

Canada is the largest aluminum supplier to the U.S., accounting for 70% of the 3.92 million tons imported last year, according to Trade Data Monitor. The Aluminum Association argues that domestic capacity is insufficient to meet growing demand, particularly as the US invests in infrastructure and new technologies.

"The US cannot produce all that aluminum; they don't have the capacity," said Eivind Kallevik, CEO at Norwegian aluminum producer Hydro, highlighting the supply vulnerability. Industry analysts suggest that the tariff could cause aluminum to be diverted away from the U.S. and into Europe, where premiums are currently lower.

The tariffs have sparked international tensions, with Canada filing a complaint with the World Trade Organization (WTO) challenging the U.S. levies. Canada argues that the tariffs are inconsistent with U.S. obligations under the General Agreement on Tariffs and Trade (GATT) 1994.

As a result of the aluminum tariffs, and global tension, Currie is predicting increased volatility in commodity markets, which discourages investments.

"Volatility is going to explode across all these markets," said Currie. "The volatility then discourages the investment because [investors will say] I don't want to invest in this thing; it's too volatile."