Global metal markets are undergoing significant pricing disruptions as tariffs reshape supply chains and create arbitrage opportunities. The widening price gaps between regional exchanges, particularly in the U.S., have made real-time risk management essential for traders, manufacturers, and recyclers. While floating premiums in some metals allow for cost adjustments, others with fixed-price contracts face heightened exposure. Understanding these dynamics is critical for businesses looking to optimize pricing strategies and hedge against volatility.

Aluminium

U.S. aluminium premiums have surged to nearly $900 per metric ton, a sharp increase from $530 per metric ton before the announcement of import tariffs. The price spike reflects heightened uncertainty in the market as traders and buyers anticipate higher import costs. Unlike other non-ferrous metals, aluminium contracts in the U.S. are usually structured using floating premiums, which adjust on market benchmarks. This structure helps mitigate the risk of sudden price shifts, as rising purchase premiums are passed on to buyers.

The volatility has created both winners and losers. With no clarity on how long these tariffs will remain in place, the market is bracing for continued fluctuations, making real-time risk management a necessity for those in the aluminium supply chain.

Copper

The U.S. copper market is experiencing unprecedented price dislocation, with Chicago (Comex) futures trading at a record $920 per metric ton premium over London (LME) copper. This extreme spread is largely fueled by speculation over potential copper import tariffs, leading to aggressive arbitrage activity. Traders are exploiting the regional price gap by selling into the higher-priced Comex market while sourcing material from the lower-priced LME market.

The pricing discrepancy is causing significant challenges for U.S. recyclers and scrap processors. Overseas buyers of U.S. copper-bearing scrap are unwilling to pay Comex-based prices when they can buy LME priced material for several cents per pound less. At the same time, industrial customers in the U.S. insist on selling their generated red metal scrap at Comex values, creating a disconnect that complicates trading.

Like zinc and lead, copper contracts in the U.S. are primarily negotiated with fixed premiums. If tariffs are imposed, those locked into these contracts will likely face major exposure, as they would be unable to adjust pricing in response to rising costs, unless hedged. This situation underscores the need for flexibility in pricing models and the ability to operate between exchanges to hedge effectively.

Zinc & Lead

The possibility of import tariffs being extended to sister metals zinc and lead is a growing concern, as these markets rely heavily on fixed-premium contracts. Unlike aluminium, where floating premiums allow for cost pass-through, zinc and lead contracts in the U.S. are typically locked in for a year, similar to copper. If import costs spike unexpectedly, traders holding fixed-price contracts could suffer significant losses.

Without effective risk management tools, traders in the zinc and lead markets could see their annual profits erased in a matter of days.

Why Real-Time Hedging is Critical

The current volatility across non-ferrous markets highlights the need for dynamic hedging strategies. In aluminium, risk needs to be managed around the clock with automated stop levels to mitigate sudden price spikes. For copper, the ability to trade between exchanges and hedge against arbitrage risk is crucial. In the zinc and lead industries, where hedging tools are less developed, businesses must take proactive steps to protect long-term fixed-price structures from unexpected tariff-driven cost surges.

Talk to us at Pillar today for customized and automated hedging solutions that help metal trading businesses navigate market volatility, optimize pricing structures, and manage risk effectively.