The Commodity Futures Trading Commission is preparing a review of U.S. aluminum pricing and is assessing whether alternative contracts could bring greater transparency to the domestic market, Chairman Michael Selig said on Friday.
Aluminum is a core input for a range of sectors, including automotive, aerospace, packaging, construction and defense. Movements in the metal's price can ripple through corporate margins and have the potential to contribute to inflationary pressure in the broader economy.
Currently, U.S. buyers typically pay the benchmark price set on the London Metal Exchange plus a Midwest premium. That premium is assessed by price reporting agency Platts, which is part of S&P Global, and is intended to cover additional costs such as freight, insurance and taxes.
At the start of June the Midwest premium hit a record $1.19 per pound, roughly $2,620 per metric ton. That level was more than double the premium recorded a year earlier, a period that coincided with President Donald Trump raising tariffs on U.S. aluminum imports to 50% with the stated aim of encouraging domestic production investment.
During the same period, aluminum quoted on the London Metal Exchange climbed to four-year highs above $3,700 per metric ton, a rise attributed in the statement to shortages linked to the war in the Middle East. Taken together, the LME price and the Midwest premium pushed the combined cost for U.S. consumers above $6,000 per ton.
Selig expressed concern that the prevailing benchmark arrangement can embed costs that do not accurately reflect the actual supply chains of American manufacturers. He cautioned that this misalignment stems from a benchmark structure that may be poorly matched to U.S. physical metals markets.
In response, the chairman said he has asked the commission's global markets team to examine existing pricing mechanisms and to formulate concrete reform options intended to protect U.S. markets and American manufacturers. Those remarks were delivered at the annual meeting of the Beer Institute, an industry group whose members include companies that use aluminum to produce beverage cans.
The CFTC's review will consider whether the creation of new contracts could advance transparency in price discovery and better align benchmark pricing with physical trade flows and costs faced by U.S. end users. The agency has not announced specific contract designs or a timeline for the proposal of reforms.
Market watchers and participants are likely to follow the outcomes of the CFTC's internal review closely, given the metal's wide industrial use and the degree to which benchmark and premium moves have already affected costs for American manufacturers. The scope of any eventual regulatory changes, and their practical effects on pricing, remain to be determined by the options developed by the global markets team.
Related market references noted in the remarks:
- Benchmark pricing is set on the London Metal Exchange.
- The Midwest premium, assessed by Platts of S&P Global, reached a record $1.19 per pound at the start of June.
- London Metal Exchange aluminum exceeded $3,700 per metric ton amid shortages tied to the war in the Middle East.
- Combined LME price and Midwest premium pushed U.S. consumer costs above $6,000 per metric ton.