Midwest Premium remains source of skepticism for trade group

The Washington-based Beer Institute, a national trade organization formed more than 160 years ago to represent the United States beer industry, has created a website to educate consumers and lawmakers about the Midwest Premium (MWP).

The trade group’s skepticism of the MWP is not new and traces back at least to the imposition of 10 percent tariffs on imported aluminum imposed during the Trump administration in early 2018.

Around that time, S&P Global Platts issued a three-page document designed to delineate “Myths and Facts about the Midwest Premium.”

That document highlights a quote from brewing executive Pete Coors: “The Midwest Premium is a ‘fee’ that is charged to buyers and end users of aluminum—intended to account for ‘transport and storage’ costs.”

Flatly disagreeing with that assertion, S&P Global Platts writes, “The Midwest Premium is not a ‘fee’ for ‘storage and transportation’—it is simply a term for the regional price of aluminum in the Midwest United States.

“The ‘Midwest Premium’ is simply a term for the regional price of pure aluminum—known as ‘primary’ aluminum—supplied to the Midwest region of the United States.”

However, the MWP also is used as a peg in the trading of secondary aluminum and aluminum scrap in the Midwest region and beyond. “The MWP is one of many regional commodity price assessments by Platts and other price reporting entities that market participants may use as a reference point to understand the going rate for a particular commodity in a particular region of the world," S&P Global Platts adds.

While Platts publishes the MWP price, it does not set the Midwest premium or the price of aluminum, saying it “simply provides (like its competitors) an independent assessment of where the price of aluminum fell between buyers and sellers in the market each day (the use of which is voluntary).”

About five years later, the Beer Institute remains unconvinced. “The MWP is a dubious pricing system that allows aluminum producers to charge end users a tariff on nontariffed metal. Aluminum producers are able to engage in this questionable behavior because there is currently no regulatory body overseeing the usage of the MWP,” the organization says in a mid-November news release.

To back up its claim, the institute says research conducted by Texas-based Harbor Aluminum found the U.S. beverage industry paid $1.893 billion in Section 232 tariffs on 9.042 million metric tons of aluminum since the implementation of the tariffs. Of that amount, only $126 million (7 percent) went to the U.S. Treasury. Harbor Aluminum estimates U.S. rolling mills, U.S. smelters and Canadian smelters received $1.767 billion (93 percent) of the total by charging end users—such as U.S. brewers—a tariff-burdened price regardless of whether the metal was meant to be tariffed based on its content or origin.

“The Midwest Premium has evolved into a black box that artificially drives up the price of aluminum for end users, including the maker of your favorite beer,” says Brian Crawford, president and CEO of the Beer Institute.

“Over the last five years, the American beverage industry has paid nearly $2 billion in Section 232 aluminum tariffs, in large part due to the MWP, which allows aluminum companies to charge inflated prices with no oversight. MidwestPremiumExposed.org is a step toward holding companies accountable, bringing transparency and competition back to the aluminum market and delivering relief for the brewers and countless other industries hurt by inflated aluminum prices.”

Regarding the “black box” accusation, in its earlier document S&P Global Platts writes, “Platts undergoes an annual review by an external auditor around its adherence to these processes, the results of which are also published on its website.

“S&P Global Platts does not ‘artificially inflate’ the MWP or the price of aluminum, and has no financial stake in the price of aluminum or any commodity going up or down.”