A month after a bipartisan group of Congressional members called on the Department of Justice (DOJ) to investigate potential irregularities in the aluminum market, Platts, the group responsible for helping set the price of the metal purchased by thousands of U.S. beer companies, has vowed to offer greater transparency into current price assessments.
Platts, which is owned by Standard & Poor’s and bills itself as “the leading independent provider of information and benchmark prices for the commodities and energy markets,” last week announced that it would begin publishing alternative pricing for non-tariffed aluminum and domestically available scrap, starting August 1.
“Our new implied duty-unpaid price assessments provide market participants with greater transparency of aluminum values in a tariff environment,” said Ian Dudden, S&P Global Platts’ global content director of metals and agriculture, via a press release.
Currently, producers and end users pay a single price for aluminum.
According to Platts, several aluminum grades, including scrap and cansheet, “may not be subject to duties and our new implied duty-unpaid price assessments allow for valuation comparisons for other non-tariffed aluminum.”
However, Platts has made no changes to the U.S. Midwest Transaction Premium, which consists of a base price for aluminum as traded on the London Metal Exchange as well as the controversial Midwest Premium, the full logistical costs of shipping and storing the metal in the U.S.
The Midwest Premium — which spiked after the announcement of President Donald Trump’s 10 percent tariff on imported aluminum despite logistical costs of sourcing the metal remaining the same — has come under fire in recent months from beer industry leaders, including national trade organization the Beer Institute (BI) and Molson Coors Chairman Pete Coors. In June, more than 30 Congressional members called on Attorney General Jeff Sessions to investigate “pricing irregularities and potential anti-competitive conduct” related to the Midwest Premium.
Between August 2017 and March 2018, the Midwest Premium price has more than doubled, from around $.08 to more than $.20 per pound.
The BI has argued that the Midwest Premium is being used to “artificially inflate” the price paid for aluminum at the expense of end-user businesses and consumers. That’s important to beer companies because about 60 percent of the beer produced and sold in the U.S. is packaged in aluminum cans.
Speaking to Brewbound, BI president and CEO Jim McGreevy said publishing prices for aluminum already in the United States and scrap metal could potentially give businesses a price break on the metal. However, he said Platts is ignoring “systemic” issues with how the Midwest Premium price is determined.
“The price setting procedure that they use is still done with the disproportionate input of aluminum traders and suppliers,” he said. “It’s not transparent. It doesn’t use actual prices. It uses bids and quotes, whereas we think that using the actual price to set the standard would be better.”
McGreevy said Platts is publishing the duty-unpaid prices to “placate the concerns of the end users and the members of Congress.”
“We’re concerned that they’re doing this at this moment to try to get out from under answering the hard questions that they clearly are not interested in answering,” he said.
McGreevy again called on federal regulators to investigate potential price gouging associated with the Midwest Premium.
Nevertheless, the effects could soon be hitting the wallets of beer drinkers.
Citing economist John Dunham, McGreevy said beer companies are paying about a penny more per can, which could cost consumers an extra five cents per can.
The Chicago Tribune reported that MillerCoors is expected to raise prices for retailers in Chicago for most of its offerings — in both aluminum cans and glass bottles — starting September 17. Those price increases could cost beer drinkers up to $1 per case for products from the second largest beer company. A MillerCoors spokesman did not return a request for comment.
Previously, MillerCoors CEO Gavin Hattersley had estimated that the tariffs would cost the company about $40 million in profits.
MillerCoors isn’t alone. During last week’s second-quarter earnings call, Boston Beer Company announced plans to increase prices by as much as 2 percent during the second half of the year due to “significantly higher” commodities and transportation costs.
McGreevy added that he’s also heard from small brewery owners who have said their aluminum costs have already increased by as much as 5 percent.
And President Trump’s tariffs aren’t just affecting beer companies. Coca-Cola CEO James Quincey told CNBC last week that the tariffs are “one of many factors” leading the soda giant to raise prices mid-year.
“We’re four months into this thing and to some extent, the chickens are starting to come home to roost,” McGreevy said.