aluminum cans crown
Beverage producers say the Section 232 tariff on aluminum has “cost America’s beverage industries an additional $848.6 million."
Photo courtesy of Crown Holdings Inc. and Finn Partners.

Aluminum pricing gains attention of US Senate

Bill introduced would give Commodity Futures Trading Commission oversight over aluminum pricing if passed.

August 4, 2021

A consortium of trade associations has given its backing to a bill introduced in the United States Senate that would give the U.S. Commodity Futures Trading Commission “jurisdiction over the markets, including the process, oversight, transparency and manner in which reference prices for aluminum premiums are set or reported.”

That phrasing is found in the second paragraph of the second section of House Resolution (HR) 2698, legislation introduced in the U.S. House of Representatives in April. It also is used in the Aluminum Pricing Examination (APEX) Act recently reintroduced in the Senate by Sens. Tammy Baldwin (D-Wisconsin) and Tom Cotton (R-Arkansas).

“We applaud Sens. Baldwin and Cotton for their work to ensure aluminum costs reflect market fundamentals,” says Jim McGreevy, president and CEO of the Washington-based Beer Institute, one of five trade associations releasing a joint statement backing the bill.

The bills likely are tied to an effort to reconsider and repeal tariffs introduced by the Trump administration in 2018 on imported aluminum. Aluminum consumers, including beverage can makers and boat manufacturers, have long contended the tariffs have restricted aluminum supplies and caused spikes in prices.

The associations cite a report by Texas-based Harbor Aluminum which found that from March 2018 through December 2020 the Section 232 tariffs “cost America’s beverage industries an additional $848.6 million.”

The associations say the tariffs “have created significant costs on aluminum end-users, and these costs are only magnified by the problem inherent in the current aluminum premium pricing structure. When the tariffs are coupled with the effects of the pandemic, American businesses are faced with enormous costs, and American jobs and future investments are imperiled.”

As prices for aluminum in the U.S. have risen (including prices for used beverage cans (UBCs) and other aluminum scrap), the Midwest Premium (MWP) has gained attention. Pricing service S&P Global Platts says the MWP “is not a ‘fee’—it reflects the regional price of aluminum.”

The Section 232 tariffs, by imposing a 10 percent duty on aluminum imports, have likely contributed to a lofty MWP in recent years. Also contributing has been a steady rise in demand for aluminum packaging caused in part by a growing stay-at-home beverage market during the pandemic and by recycled-content aluminum’s positive status as sustainable packaging.

Whether the effort to investigate the MWP and other pricing mechanisms outlasts the Section 232 tariffs on aluminum (if and when such tariffs are rolled back) will be closely watched by aluminum producers and aluminum scrap processors.

On its website, S&P Global states “commodity transactions occur out of sight” but its tracking of the MWP and other prices “sheds light on these deals as a neutral third party.” Adds the business information service, “S&P Global Platts provides an independent assessment of where commodity prices fall each day and has no financial stake in the price going up or down.”

The five trade associations (American Beverage, the Beer Institute, the Consumer Brands Association, the Flexible Packaging Association and the National Marine Manufacturers Association), however, sound anxious to find out more about the pricing methodology.

“As manufacturers face cost increases at every link in their supply chains, there could not be a more important moment for this legislation,” says Geoff Freeman, president and CEO of the Consumer Brands Association. “The APEX Act will bring more certainty and transparency for the consumer packaged goods industry – which depends on aluminum to make and package everything from aluminum foil to canned goods –  and will allow the consumer packaged goods industry to continue to deliver essential goods to the American people. We thank Senators Baldwin and Cotton for their leadership on this critical issue.”

The text of HR 2698, identical or nearly identical to the APEX Act, can be found on this web page.