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(Bloomberg) -- Looming aluminum tariffs have put US 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.
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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 Group, the top supplier of aluminum to the US, 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 $11 billion US market, with no immediate plans by producers in Canada to shift tons elsewhere, according to people familiar with the matter.
US 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 Officer 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 US.”
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% tariff, it would only stop selling the metal to US customers if a regional premium goes below about 45 cents a ton, said a person familiar with the matter. Anything less than that would make selling to US 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 honor its existing customer contracts regardless.