High aluminum price will affect more than the cost of your 6-pack | TheHill

The last few months have seen rare volatility across the price of aluminum in markets around the world.

History shows that trade wars, sanctions and the fear of commodity scarcity have long been factors to incite a buying rush in physical commodities. When a number of these come together — as they have in the aluminum market recently — it’s the perfect psychological storm to create price upheaval.

In the U.S., the price of aluminum jumped 26 percent at its peak in April, and it remains 12-percent higher since January. If the price rise is sustained, it could have wide-ranging implications for many sectors, including transportation, construction, electrical and consumer goods.

As specific country exemptions were announced — including Canada, the largest supplier of aluminum to the U.S. — domestic and global aluminum pricing edged lower. But the U.S. market did not decrease much because of regional supply concerns, in part due to output at a Canadian smelter still being curtailed and exemptions for key aluminum import partners being only temporary.

In fact, when the 10-percent tariff on U.S. imports of aluminum was announced on March 8, the regional price differential of aluminum in the import-dependent U.S. market jumped 11.8 percent, as compared to a typical day-to-day price move that ranges between -2 percent to +2 percent.

The Midwest Premium provides transparency into local market conditions.

In the United States, the marketplace generally prices aluminum as the London Metal Exchange (LME) price plus the “Midwest Premium.” The S&P Global Platts Midwest Aluminum Transaction Premium is a regional differential to the global price of aluminum, which is traded on the LME.

The Midwest Premium is assessed using a published methodology and sheds light on local U.S. market conditions. The differential reflects the regional cost of logistics, such as trucking freight and handling charges, as reported to Platts price assessors by a wide range of market participants.

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High aluminum price will affect more than the cost of your 6-pack | TheHill.