By Pratima Desai

LONDON (Reuters) -Century Aluminum, the largest primary aluminium producer in the U.S., and top recycler Matalco will be among the big winners from President Donald Trump's higher tariffs on imports of the metal as domestic prices surge, four industry sources said.

However, some sector players are worried that Trump's move from June 4 to hike the tariffs to 50%, from 25%, could push prices so high that demand starts to weaken.

Higher revenues for U.S. aluminium producers and recyclers are expected mainly due to the way the market prices the metal key for construction, power and packaging industries.

The companies typically charge customers the London Metal Exchange aluminium price plus a physical market premium to cover other costs including freight and taxes.

The so-called Midwest premium hit a record 62.5 U.S. cents a lb, or $1,377 a metric ton, on Friday. Since Trump was elected for his second term in November, it has surged nearly 190%.

Consultancy Harbor Aluminum said the premium would have to rise to 70 cents a lb, or $1,543 a ton, to fully reflect the 50% tariff.

Century, in which London-listed miner Glencore is the top shareholder with a stake of more than 40%, declined to comment beyond a statement it issued last week, in which it welcomed the 50% tariff.

Century produced 690,000 metric tons of aluminium last year.

Miner Rio Tinto, which owns a 50% stake in Matalco, declined to comment, speaking on behalf of the U.S. company, which produced 528,000 tons of recycled or secondary aluminium last year.

U.S. imports of scrap aluminium remain free of tariffs, but aluminium recycling needs primary metal to maintain properties of alloys used to make industrial goods.

UNINTENDED CONSEQUENCES

Alcoa, one of the world's largest aluminium producers, said its U.S. smelters would also benefit from the tariffs, and that its active production capacity in the United States totalled 291,000 tons.

Alcoa's global aluminium output was 2.215 million tons last year.

Constellium, which has a capacity to recycle 360,000 tons of aluminium annually in the United States, said it supported the original 25% tariff because it helped address unfair trading practices by non-market economies. 

"However, we are concerned that increasing the tariff beyond this level could have unintended consequences - potentially disrupting the aluminum supply chain and impacting demand," it added.

Higher aluminium costs are likely to be passed on to consumers, which analysts expect will eventually hit demand.

SCRAMBLE FOR SCRAP

With its local primary aluminium industry in decline for years, the U.S. relies on imports of large amounts of unwrought aluminium and alloys - more than 3.9 million tons last year, according to U.S. government data.

The U.S. produced more than four million tons of aluminium last year, most of it recycled material, according U.S. Geological Survey.

Industry sources expect U.S. scrap aluminium imports to climb as recycling companies take advantage of high premiums to ramp up production.

Already U.S. scrap aluminium imports have started to rise. Data from information provider Trade Data Monitor shows U.S. scrap aluminium imports rose more than 30% to 201,968 tons in the first quarter of this year from the same period in 2024.

Traders said the high Midwest premium would allow recyclers to bid more for scrap than buyers outside the United States, as they can sell aluminium locally at a higher price.

LME aluminium is trading around $2,500 a ton, while the duty-paid premium in Europe has dropped more than 50% to $170 a ton since January on expectations some global producers will divert primary metal to Europe to avoid U.S. tariffs.

(Reporting by Pratima Desai. Editing by Veronica Brown and Mark Potter)