Introduction
The United States is the world’s largest net importer of aluminum, with half of their imports coming from Canada. The U.S. consumes about five million tonnes of primary aluminum per year and some forecasts see that the United States could need up to 6.4 million tonnes per year by 2035.
Background
U.S. President Donald Trump issued a proclamation in February entitled “Adjusting Imports of Aluminum into The United States,“ increasing U.S. tariffs on aluminum imports to 25 per cent from 10 per cent, while citing national security concerns and excess global capacity. The decision applies to imports from Canada, Australia, Mexico, Britain and the EU, ending prior exemption agreements.
The administration claims foreign producers – especially those from China – are circumventing tariffs via third countries such as Mexico, harming U.S. smelters and depressing domestic capacity. The proclamation also ends product exclusions and expands the tariff’s scope to include derivative aluminum products, with the aim of restoring domestic industry viability and achieving an 80-per-cent production capacity utilization target (which is currently at 38 per cent.)
Current status
The 25-per-cent tariff on aluminum imports from Canada took effect March 12, 2025. Canada has retaliated with its own 25-per-cent tariffs on a range of U.S. products, including $3-billion in aluminum products.
Where is this heading?
Bauxite is the primary ore used to produce aluminum. Major producers are Australia, Guinea and Brazil. Canada and the United States do not mine significant bauxite domestically for aluminum production. (The U.S. does, however, mine bauxite for abrasives and use in the oil and gas industry).
Bauxite is chemically processed to produce alumina, a white powder. This process typically occurs near bauxite sources or in countries with cheap energy. Alumina is reduced to primary aluminum (two tonnes of alumina are required to produce one tonne of aluminum) via electrolytic smelting. This step is extremely energy-intensive and often located near low-cost hydroelectric power.
The need for low-cost hydroelectric power is to our advantage in Canada. We produce about three million tonnes of aluminum per year on a smelting capacity of 3.2 million tonnes, predominately in Quebec, with some produced in British Columbia. Aluminum smelters in Canada are concentrated in the Saguenay-Lac Saint-Jean – North Shore region of Quebec.
The United States produces about 600,000 tonnes per year with a smelting capacity of 1.6 million tonnes – its low utilization rate owing to high energy costs and several idled facilities. That is part of the issue in this tariff dispute. For the U.S. to increase smelting capacity, they will need both time to restart idled plants, and more importantly, long-term power agreements at lower rates to be competitive with what we can produce in Canada. At the turn of the millennium, the U.S. was the global leader in aluminum production with 23 smelters nationwide. Today they have four active smelters.
The United States and Canada are both increasing their reliance on recycled aluminum (secondary production), which uses about 95-per-cent less energy. In Canada it is estimated we recycle between 700,000 and 900,000 tonnes per year and the United States recycles between 3.5 and four million tonnes of aluminum per year. The aluminum recycling process maintains the material’s quality, allowing for a theoretical indefinite recycling.
Global supply and demand
Global use of aluminum as of 2023 includes the automotive and transportation sector, which accounts for 29 per cent of consumption, construction at 22 per cent, foil and packaging uses 16 per cent, electrical engineering and electronics at 12 per cent, machinery and equipment at 8 per cent, consumer goods with 4 per cent, and the balance (9 per cent) goes to other applications. China is the largest global consumer of primary aluminum at 58 per cent, with Europe, North America and the rest of Asia consuming about 10 per cent each.
Summary
The United States will need more aluminum by 2035 and does not have competitive power rates to bring idled capacity back online. They actively smelt 600,000 tonnes per year against a demand of five million tonnes. Given the desire to re-shore/onshore more production in the U.S., we would have to expect an overhaul of power rates if they hope to achieve that goal, or a dramatic increase in secondary production would need to occur to meet demand.
Brian Donovan, CBV, is the president of StockCalc, a Canadian fintech based in Miramichi, N.B.
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