The Australian aluminium industry stands at a crossroads as the U.S. flirts with sweeping tariffs on aluminium imports, putting South32 (ASX: S32) in the spotlight. Is this a moment for Australia to prove its resilience, or are we headed into a looming disaster for its prized producer?

What is the impact of Australia’s aluminium exports to the U.S.?

Australia is the world’s largest alumina exporter and the seventh-largest aluminium producer, raking in $15 billion in export earnings in 2023 and supporting over 60,000 families. Yet, despite this global footprint, only 10 per cent of its aluminium exports go to the U.S., making up just 2.5 per cent of America’s total imports.

So why is the U.S. targeting Aussie aluminium? Peter Navarro, a key Trump trade adviser, claims it’s “killing the U.S. market.” But let’s be real—Australia’s small slice of the pie isn’t the root of America’s aluminium woes. Analysts argue domestic inefficiencies are the real culprit, not competition from downunder.

What are the challenges and opportunities for S32?

This puts South32 in a crucial position. As one of Australia’s largest aluminium producers, the proposed tariffs present both challenges and opportunities. While losing access to the U.S. market would sting, South32’s diverse operations across multiple regions and commodities could help offset the blow.

Looking at the chart, South32 is holding strong. Twice finding support around $2.70, the stock now trades above $3.30. A breakout past $3.60 could see it test $4.00, while a slip below $3.30 might bring $2.70 back into play.

Tariffs or not, Australia’s aluminium sector is no stranger to headwinds. The real question is—can it pivot and adapt in time? South32’s ability to navigate shifting trade dynamics might just hold the key.

What were the best and worst-performing sectors last week?

The best-performing sectors included Industrials, up 2.93 per cent, followed by Consumer Staples, up 2.42 per cent and Consumer Discretionary, up 2.38 per cent. The worst-performing sectors included Healthcare, down 3.75 per cent, followed by Energy, down 1.14 per cent and Information Technology, down 0.73 per cent.

The best performing stocks in the ASX top 100 included Computershare Ltd, up 20.70 per cent, followed by Light and Wonder Inc, up 11.31 per cent and Mirvac Group, up 8.21 per cent. The worst-performing stocks included Cochlear Ltd, down 15.20 per cent, followed by AMP Ltd, down 13.62 per cent, and Insurance Australia Group, down 11.75 per cent.

What's next for the Australian stock market?

The All-Ordinaries Index surged to a record high of 8,882 points last week, fuelled by strong buyer momentum. However, the rally was met with some selling pressure on Friday, with the index ultimately closing half a per cent higher. This move came as no surprise, given the solid buying support from the week before, especially in the face of a wave of uncertain market news coming out of the United States.

So, what’s next? Historically, the All-Ordinaries Index has delivered an annual return of around 9 per cent. What’s intriguing is that we’re already a third of the way there, and the year is barely two months old. The speed of this market rally is impressive, but more importantly, it’s looking sustainable. Why?

Let’s examine the past three major rallies. Since November 2023, the All-Ordinaries has posted two solid moves up which garnered double-digit returns—averaging around 15 per cent. The trajectory of the current rise, from the low on the 20th of December, mirrors those previous moves, indicating a healthy pace.

What does this mean moving forward? The market isn’t overstretched yet, which suggests we could see a strong finish to the reporting season in March before any major pullbacks.

So, if you think you’ve missed out on the opportunities of 2025 so far—think again. The tide is rising, and there are opportunities across almost every sector right now. In particular, the Energy sector looks like it’s ready to break out after being underappreciated throughout much of 2024. Keep an eye on this one—it could be on the brink of a major upswing.

For now, good luck and good trading.

Dale Gillham is the Chief Analyst at Wealth Within and the international bestselling author of How to Beat the Managed Funds by 20%. He is also the author of the bestselling and award-winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good bookstores and online.