Brewers and bottlers demand investigation on surging aluminium premiums in the U.S.

Craft beer brewers and bottlers are raising questions on the 100% surge in the US aluminium premiums after Trump’s 10% tariffs on imported aluminium. The chairman of Molson Coors Brewing Co. and a bottler for PepsiCo Inc. has already requested the government to investigate the process which is used to set benchmark aluminium premiums. Commerce Secretary Wilbur Ross has supported the move as he too considers the rise unjustified.

The premium or the surcharge that needs to be paid for physical delivery of the metal includes transportation and handling costs along with the amount of supply available. The premiums are determined by London-based S&P Global Platts using its own market survey methods.  Platts establishes the pricing for commodities by surveying market participants including buyers, sellers, traders and brokers.

Beverage makers claim that the process could be manipulated.

“Is it manipulated?” Molson Coors Chairman Pete Coors said in an interview. “Our thinking is maybe it’s time to have an investigation of that.” He said that the rise in premium has cost his company US$40 million in 2018.

Platts said that the rise in the U.S. Midwest Aluminium Premium in 2018 reflected a supply scarcity due to Trump’s import tariffs and sanctions on Rusal.

Dave Ernsberger, S&P Global Platts’s head of pricing said that MillerCoors could be having a problem with is the price of the market but not with the data itself.

U.S. Commerce Secretary Ross, however, is not convinced about the market survey process. “The fact of aluminium’s price going up does not seem to justify a huge increase in the Midwest premium,” he said in a statement to Bloomberg.

Coors and other companies claim that market surveys might not be based on actual trading data and participants’ might not be honest about their price inputs. Platts’s Ernsberger, however, said that each data collected is properly verified before coming to a conclusion.

Coors is urging Congress to consider whether the federal Commodity Futures Trading Commission should have oversight of the pricing process. Based on the claims the bottlers are demanding an investigation and oversight of the Platts process.

CRU is of the view that higher aluminium premiums for the U.S. are not unjustified as the U.S. still faces a 2-million-ton deficit even after considering the 2.5 million tons imported from Canada. Despite that the U.S. consumers need to import from Russia, the Middle East and other countries to feed their demand and all those countries are still under the 10% import tariffs.