Aluminum Costs Are Up 29%. Three Forces Are Driving the Increase and None of Them Are Going Away Soon.
Aluminum was trading at roughly $2,545 per tonne on August 1, 2025. On August 10, 2026, the London Metal Exchange spot price stands at $3,280 per tonne. That is a 29% increase in 12 months on the benchmark price alone, before U.S. tariff premiums are added on top.
For food and beverage producers that rely on aluminum cans, can-ends, and closures, that number is not abstract. It is showing up in supplier invoices, contract renegotiations, and quarterly cost-of-goods calculations right now. Coca-Cola Consolidated flagged higher aluminum costs as a primary driver of a $166.7 million increase in cost of sales in Q1 2026. Conagra has projected tariff and input cost pressures adding more than $200 million to its annual cost of goods sold in 2026. Crown Holdings reported that Americas Beverage revenues rose 21% in Q2 2026 almost entirely due to the contractual pass-through of higher aluminum costs, with North American can volumes up 5% in the same period.
Three distinct forces are driving this simultaneously. Understanding each one separately is what allows a procurement team to build a strategy around them rather than just absorbing the impact.
LME aluminum hit $3,651 per tonne in late May 2026, its highest level since 2022. Prices pulled back through June but have recovered to $3,280 as of August 10, 2026, up 29% year over year. The structural forces behind the move have not resolved.
Force One: Section 232 Tariffs Have Been Restructured, Not Reduced
The 50% Section 232 tariffs on primary aluminum imports have been in place since June 2025. What changed significantly in April 2026 was how those tariffs are calculated. A presidential proclamation effective April 6, 2026 shifted the assessment basis from the metal content value of an imported product to its full customs value. For finished packaging components, that is a meaningful increase in effective tariff exposure regardless of what the LME price does.
The April restructuring also introduced a tiered rate system. Products made almost entirely of aluminum remain at 50%. Products substantially made from aluminum are now assessed at 25%. Products where aluminum content is less than 15% of total weight by value are exempt. Can sheet and primary aluminum remain at 50%. Certain can ends and lids fall into the derivative category at 25%, though importers should verify their specific product classifications against the updated HTS subheadings.
There was a moment in early 2026 when the can manufacturing industry believed relief might be on the way. The Can Manufacturers Institute applied to have filled food and beverage cans added to the Section 232 derivatives list, which would have lowered the effective tariff rate on imported canned goods. The application was completely denied. CMI president Scott Breen stated that the decision keeps costs high for domestic can manufacturers while allowing foreign-filled canned beverages to enter the U.S. at lower effective tariff rates, the opposite of what a domestic production-first trade policy would typically deliver.
On July 20, 2026, a new Section 232 aluminum investment incentive program was created. Companies that commit to building, expanding, or refurbishing U.S. primary aluminum smelting facilities and receive Commerce Department approval can import primary aluminum at half the standard Section 232 rate, in quantities tied to the facility’s anticipated output. Construction must begin by January 20, 2029. This is not a broad tariff reduction. It is a narrow, firm-specific, application-based pathway that will take months to navigate and will benefit large-scale primary aluminum producers more than it will benefit downstream packaging buyers.
Force Two: The Strait of Hormuz Has Removed a Significant Share of Global Supply
The Middle East conflict that began in early 2026 triggered a supply disruption that aluminum markets had not priced in. According to Wood Mackenzie, the ongoing conflict has put 6.8 million tonnes of global aluminum production at risk, equivalent to 18% of global exports outside China. The firm projects that disruptions could remove 3 to 3.5 million tonnes of output in 2026, and expects LME prices to reach approximately $3,500 per tonne if the conflict persists.
The mechanism is straightforward. Gulf Cooperation Council nations, principally the UAE, Saudi Arabia, and Bahrain, collectively produce around 9% of global primary aluminum. Their smelters depend on the Strait of Hormuz both as the outbound corridor for finished metal and as the inbound route for alumina and bauxite raw materials. When the strait was effectively closed to commercial traffic, those smelters faced simultaneous pressure on their inputs and their ability to export output. The supply shock hit both directions at once.
LME aluminum peaked at $3,651 per tonne in late May 2026 as the conflict premium was fully priced in. Prices fell sharply in June when markets began pricing in a formal resolution. An April 7 ceasefire halted major combat operations but did not reopen the strait to normal traffic. Ships were forced through a narrow Iranian-supervised corridor with activity still nearly 95% below pre-crisis levels. On June 15, aluminum futures dropped 4.4% to a two-month low of $3,379.50 as markets anticipated a formal agreement. Two days later, on June 17, President Trump and Iranian President Pezeshkian signed the MOU formally declaring safe passage for commercial vessels. That deal collapsed in early July when Iranian forces resumed attacks on commercial vessels deemed noncompliant with Iranian routing demands. By mid-July the U.S. naval blockade had been effectively reimposed. As of August 10, transits through the Strait are running at approximately 13 vessels per day against a pre-crisis baseline of 88 to 130 per day, and the price premium from the supply disruption has fully returned.
LME warehouse stocks have fallen to their lowest level this century. Output outside China fell 6.7% year-on-year in July, mainly due to reduced operating rates at Middle Eastern smelters. Alcoa Corporation cut its production forecast in August following operational issues at an Australian refinery, adding further pressure to an already constrained supply picture. The Emirates Global Aluminium Al Taweelah refinery restarted following a three-and-a-half-month outage, but analysts note that supply from the region will take longer than anticipated to reach the market given the ongoing Hormuz logistics situation.
Wood Mackenzie projects aluminum prices reaching $3,500 per tonne in 2026 if Hormuz disruptions persist. LME inventory has fallen to its lowest level this century and output outside China dropped 6.7% year-on-year in July. Neither condition has resolved.
Force Three: China's Production Cap Is Getting Tighter
China produces more primary aluminum than any other country, and its output is constrained by a government-imposed production cap of 45 million tonnes per year. That cap is increasingly binding as Chinese smelters approach the ceiling, limiting the country’s ability to respond to global supply shortfalls with additional output the way it has done in previous price cycles. Rising energy costs tied to Chinese emission regulation add another layer of constraint on domestic production economics.
The result is a market where the traditional pressure valve of Chinese supply expansion is less available than it was. When GCC supply is disrupted and Chinese output is capped, the adjustment has to come from elsewhere: higher prices, inventory drawdown, or demand reduction. All three are happening simultaneously in 2026.
What This Means in Practice for Packaging Buyers
The 29% year-over-year price increase is the headline, but the more important number for procurement teams is what that translates to at the can level. On a 330ml aluminum can, a swing from $2,200 to $2,700 per tonne in the LME price changes raw material cost by approximately $0.005 to $0.007 per can. On a 500,000-can order, that is a $2,500 to $3,500 swing from raw materials alone, before tariff premiums, freight, and conversion costs are added. At current LME levels around $3,280 per tonne, plus the U.S. Midwest premium and 50% Section 232 tariff on imported primary aluminum, the effective landed cost for aluminum inputs is substantially above what most 2025 contracts were priced against.
Most major can suppliers now build LME-adjustment clauses into long-term contracts, which means cost increases pass through automatically rather than requiring renegotiation. Ball Corporation’s 2025 full-year results showed favorable price-mix driven by contractual pass-through of higher aluminum costs. Crown Holdings confirmed the same dynamic in its Q2 2026 earnings, reporting that Americas Beverage revenue rose 21% almost entirely from aluminum cost pass-through, while absolute margins held. The cost did not disappear. It moved downstream.
For beverage producers at the brand and mid-market level who do not have the scale to negotiate LME-linked contracts, the cost exposure is more direct. Spot pricing for aluminum packaging components in 2026 reflects a market that is materially more expensive than it was 18 months ago and that has multiple unresolved structural reasons to stay that way.
What Your Procurement Teams Should Be Doing Now
The first priority is to understand your current cost exposure with precision. If your can or closure contracts include LME adjustment clauses, recalculate what those look like at current spot prices and at Wood Mackenzie’s $3,500 forecast scenario. If your contracts are fixed-price, determine when they expire and what the renewal conversation is likely to look like.
The second priority is to assess your supply chain’s origin exposure. Canadian-origin primary aluminum carries 50% Section 232 tariffs. GCC-origin aluminum faces the additional disruption premium from Hormuz logistics. Domestic U.S.-origin aluminum is insulated from tariff exposure but commands its own premium. Knowing the composition of what you are actually buying matters more right now than it did two years ago.
The third priority is lead time planning. In a market with low LME inventory, tightening Gulf supply, and sustained tariff pressure, the producers with firm purchase commitments and confirmed supply are better positioned than those relying on spot availability. Extending your sourcing horizon is not speculation. It is a practical response to a market where too many cost inputs are moving at once and spot availability is not guaranteed.
Capsules & Closures works with food and beverage producers across North America on cans, can-ends, crowns, ROPP closures, and a full range of metal packaging components. If current aluminum market conditions are creating uncertainty in your procurement planning, that conversation starts here.
FAQs
Q: Why is aluminum more expensive in 2026 than it was in 2025?
Three converging factors have driven LME aluminum up approximately 29% year over year through August 2026. First, U.S. Section 232 tariffs on primary aluminum imports stand at 50%, and an April 2026 rule change expanded the assessment basis to the full customs value of imported products rather than just the metal content. Second, conflict in the Middle East has disrupted supply from Gulf Cooperation Council nations, which produce around 9% of global primary aluminum, by restricting both outbound metal exports and inbound raw material shipments through the Strait of Hormuz. Third, China’s government-imposed production cap of 45 million tonnes per year is increasingly binding, limiting the country’s ability to offset global supply shortfalls with additional output as it has in previous price cycles.
Q: How does the LME aluminum price affect the cost of beverage cans?
LME aluminum is the global benchmark price for primary metal, and it directly affects the raw material cost component of aluminum beverage cans. On a 330ml can, a $500 per tonne increase in LME aluminum adds approximately $0.005 to $0.007 to the raw material cost per can. On a 500,000-can order, that translates to a $2,500 to $3,500 increase from raw materials alone. For U.S. buyers, the effective landed cost also includes the Midwest regional premium and, for imported aluminum, the 50% Section 232 tariff, making the total cost increase significantly larger than the LME move alone would suggest.
Q: What is the Section 232 aluminum investment incentive program and who does it help?
On July 20, 2026, President Trump signed a proclamation creating an incentive program under Section 232 that allows companies committing to build, expand, or refurbish U.S. primary aluminum smelting facilities to import primary aluminum at half the otherwise-applicable Section 232 tariff rate. Quantities are tied to the facility’s anticipated annual output, and construction must begin by January 20, 2029. The program requires Commerce Department approval of a detailed onshoring plan. It is designed to benefit large-scale primary aluminum producers willing to make significant capital investments in U.S. smelting capacity, not downstream packaging buyers or brand-level purchasers of aluminum cans and components.
About Capsules and Closures
Capsules & Closures, LLC is a leading U.S.-based supplier of lids, crowns, closures, bar tops, cans, and capsules for the food and beverage industry. For questions on sourcing, pricing, or market conditions, contact Capsules & Closures directly.
