Tariffs pushed up aluminum prices. War is driving them even higher

Aluminum prices have been rising ever since the war in the Middle East started.

That’s because of attacks on aluminum smelters in Iran and other Gulf countries, the closure of the Strait of Hormuz, and the rising cost of the energy those smelters need to make it.

Prices are up around 10% since the start of the war, according to CRU Group. That only adds to the 50% tariff that businesses have been paying on imported metals since June.

Wolf Tooth Components is a manufacturer of bike parts based near Minneapolis that makes hundreds of different products — including gears, pedals, and seatposts.

“I would say aluminum’s in, probably, 90% of our products,” said co-owner Brendan Moore.

He said ever since the war started, the price of the aluminum he buys has risen about 10%, even though the company mostly uses aluminum that’s made in the U.S.

“U.S. aluminum rises along with the broader commodity, and so U.S. prices have gone up, too,” Moore said.

The thing is, Moore said there’s not a lot he can do about that.

“You go to a restaurant and the lobster on the menu will say “market rate.” We don’t get to say that on our components,” he said. “Our components have a fixed price.”

Moore said raising his prices is risky. It involves coordinating with dealers across the country, and could tick off his customers.

So, instead, the company will just eat the cost and hold prices steady. Moore said he’d rather focus on the things he can control.

“The things you can control are efficiency — how well we sell and market the product,” he said.

Businesses can’t make plans around the recent aluminum price spike because they don’t know how long the war will keep pushing prices up, said Vidya Mani, a visiting business professor at Cornell University.

“Two months down the line, I might be looking at a 50% increase. Four months down the line it might be a 70% increase,” Mani said.

Plus, the war isn’t only making aluminum more expensive. It’s also causing actual shortages, said Ross Strachan, lead analyst for aluminum and recycled metal at CRU Group.

“In Japan, and South Korea, some of the auto wheel manufacturers that make aluminum wheels have had to cut their production, because they can’t get the material from the Middle East,” he said.

That said, the U.S. has levied tariffs on imported aluminum ever since 2018, so many businesses can draw from their experiences with tariffs.

“The new increases from the Iran War just falls into our same playbook,” said Chris Blench, CEO of Mavericks Manufacturing Partners, a company near San Diego that makes parts for nuclear power plants and the military.

He said his company’s playbook is simple.

“Ever since the trade policies have been driving prices up on our metals, or our raw material inputs, we’ve just been passing it on,” Blench said.

Blench said he knows that strategy will work — especially since everyone he’s competing against is in the same boat.