If you work in manufacturing, construction, or any sector that breathes aluminum, you know the price on the London Metal Exchange (LME) is only half the story. Maybe less. The real headache usually comes down to the US Midwest aluminum premium. It's that extra fee you pay just to get the metal delivered to a warehouse in the American heartland. Sometimes it feels like a ghost tax. You see it on the invoice, you know it fluctuates wildly, and you know it’s the difference between a profitable quarter and a total wash.
It’s basically the "delivery and availability" fee for North America.
Think of it like buying a concert ticket. The "face value" is the LME price. But the "service fee," "processing fee," and "delivery fee" that double the cost? That’s your Midwest premium. Except in the world of industrial metals, these fees aren't just annoying; they are a reflection of geopolitical chaos, trucking shortages, and trade policy.
What is the US Midwest aluminum premium anyway?
Let’s get the technical stuff out of the way first. The US Midwest aluminum premium is a regional price offset. It represents the cost of transporting aluminum from wherever it was smelted—be that Canada, UAE, or Australia—to a consumer in the US Midwest. It’s quoted in cents per pound.
Why the Midwest? Because that’s the historical hub of US industrial production.
Prices are typically tracked by agencies like S&P Global Platts or Fastmarkets. They talk to traders, producers, and consumers every day to figure out what people are actually paying. It isn't a "fixed" price. It moves. In 2024 and 2025, we’ve seen it bounce around because of everything from Section 232 tariffs to the simple fact that there aren't enough guys willing to drive flatbed trucks through Ohio in a snowstorm.
The weird psychology of regional pricing
Honestly, the premium is often more volatile than the base price of aluminum itself. When the LME price drops, you’d think you’re getting a deal. But if the US Midwest aluminum premium spikes at the same time, your "all-in" cost might actually go up.
It’s a supply and demand game within a supply and demand game.
If there’s plenty of metal in the world but none of it is currently sitting in a warehouse in Detroit, the premium goes up. If the government decides to slap a 200% tariff on Russian aluminum—which happened—the premium goes up. If the bridges on the Mississippi River are under repair and barge traffic slows down? You guessed it. The premium goes up.
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Why does this keep happening?
You’ve got to look at the math of domestic production. The United States doesn't make enough primary aluminum to meet its own needs. Not even close. We are a deficit market. Most of our metal comes from Canada (bless them) and overseas.
Because we rely on imports, the cost to bring that metal into the country is baked into that Midwest number. If shipping rates from the Middle East triple because of tensions in the Red Sea, that cost eventually shows up in the US Midwest aluminum premium. It’s a direct pipeline from global instability to your bottom line.
The Section 232 Factor
We can't talk about this without mentioning the "Trump Tariffs" that stayed through the Biden administration and into the current trade landscape of 2026. The Section 232 tariffs on aluminum imports changed the DNA of the US market.
By putting a 10% tax on most imported aluminum, the government effectively raised the floor of the US Midwest aluminum premium. Why? Because domestic producers realized they could raise their prices to match the cost of the taxed imports.
It’s just business.
If an importer has to pay $2,500 for metal plus a $250 tariff, the domestic guy isn't going to sell his for $2,500. He’s going to sell it for $2,740 and call it a bargain. This created a permanent "inflation" in the regional premium that hasn't really gone away, even as certain countries got exemptions.
Real-world impact: The "All-in" price
When you’re budgeting, you have to look at the "all-in" price. This is:
LME Cash Price + US Midwest Aluminum Premium = Your Actual Cost.
Let’s say the LME is at $1.10 per pound. If the premium is at 20 cents, you're paying $1.30. But if that premium jumps to 35 cents—which we’ve seen during peak logistical crunches—that’s a 15% increase in your raw material costs without the "official" price of aluminum moving an inch.
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For a company that buys 10 million pounds a year, that’s $1.5 million disappearing into the logistical ether.
What most people get wrong about "Duty-Paid"
You’ll often see the term "P1020 Midwest Duty-Paid."
P1020 is just the grade of aluminum—99.7% pure. "Duty-Paid" means the price includes the tariffs. This is crucial. If you are looking at a "Duty-Unpaid" price, you’re looking at a fantasy. Nobody gets the metal without someone paying the tax man.
A lot of newcomers to the commodities world see a low "unpaid" price and think they found a loophole. You haven't. You're just looking at a quote that doesn't include the customs bill that's about to hit your desk.
Logistics: The invisible hand
Trucking is the biggest secret behind the US Midwest aluminum premium. Aluminum is heavy. It's bulky. It requires specialized trailers.
In the last few years, the labor market for specialized hauling has been tight. When diesel prices go up, the premium follows. When there’s a shortage of flatbed drivers, the premium follows. We often think of "aluminum prices" as a reflection of "how much metal is in the ground," but the Midwest premium reminds us it's actually about "how much metal is on the truck."
How to hedge against a spiking premium
You can’t just hope the price stays low. Hope is not a procurement strategy.
- Use CME Group Contracts: The Chicago Mercantile Exchange (CME) has a specific futures contract for the US Midwest Aluminum Premium. This allows you to lock in the premium price months in advance. If you know you need 500 tons in October, you can hedge that premium now so a sudden port strike doesn't bankrupt your project.
- Diversify your scrap usage: If you can use secondary aluminum (recycled) instead of primary P1020, you can sometimes bypass the intensity of the Midwest premium. Secondary markets have their own premiums, but they don't always move in lockstep with the primary "Duty-Paid" indicator.
- Storage Strategy: If you have the floor space, buying "ahead of the curve" when the premium is low (historically under 15-18 cents) can save a fortune. But then you have to deal with the cost of carry—insurance, space, and tied-up capital.
The China Connection
Even though the US has heavy duties on Chinese aluminum, China still dictates the global flow of the metal. When China’s economy slows down, they export more semi-finished products to other parts of the world. This displaces metal from other regions, which then tries to find a home in the US.
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It’s a giant game of musical chairs.
Whenever you see news about Chinese smelting capacity or power outages in Yunnan province, pay attention. It might seem far away, but it will eventually change the availability of metal in Kentucky or Illinois, and that will move your premium.
Why the premium won't disappear
People often ask if we will ever go back to the "good old days" of 5-cent premiums.
The short answer? Probably not.
The structural costs of doing business in the US have changed. Environmental regulations are stricter, which makes domestic smelting expensive. Carbon taxes and "Green Aluminum" (metal made with hydro power) are becoming the new standard. Buyers are starting to pay a different kind of premium for "low-carbon" metal, which often gets folded into the overall Midwest price discussions.
Actionable steps for your procurement team
Stop looking at the LME as your only North Star. It’s misleading.
First, start tracking the daily Platts or Fastmarkets Midwest Premium assessments. If you aren't paying for these data feeds, you are flying blind. You need to know if the market is "backwardated" (future prices are lower than spot) or in "contango" (future prices are higher).
Second, audit your freight. If your supplier is charging you a flat "Midwest Premium" but you are located right next to a smelter, you might be getting overcharged for "delivery" that isn't actually happening. Everything is negotiable in a soft market.
Third, look at your contracts. Ensure they are indexed correctly. If your contract says "LME + 20 cents" but the market premium has dropped to 14 cents, you are literally handing money away. Conversely, if the premium is at 30 cents and you have a fixed 20-cent deal, don't be surprised if your supplier suddenly has "logistical delays" in fulfilling your order. They'd rather sell that metal to someone paying the full 30.
The US Midwest aluminum premium is a beast, but it’s a predictable one if you watch the right signals. It’s about trade policy, truck drivers, and regional scarcity. Master those, and you master your margins.