Saying the aluminum market has been subject to price manipulation that has costs the beer industry and other aluminum users billions of dollars in excess costs,” Beer Institute urged the Commerce Department to “work with the Department of Justice and the Federal Trade Commission” to probe anticompetitive conduct relating to the Midwest Premium and the impact of such conduct in artificially increasing aluminum prices for all metal, including nontariffed products.”
The request, in a letter to Brad Botwin, director of industrial studies in Commerce’s Bureau of Industry & Technology, was dated three days after Peter Coors, chairman, Molson Coors Brewing Co. complained about the Midwest Premium in a Wall Street Journal op-ed.
The letter also asked Commerce to ensure that effective mechanisms are in place to deter and redress any anticompetitive conduct in the market related to” President Trump’s tariffs on steel and aluminum.
In alleging anticompetitive conduct involving the Midwest Premium, Beer Institute focused on the London Metals Exchange (LME) warehouse system.
“Smelters use the system to sell excess stock where there is oversupply, and users turn to it in times of extreme shortage. The industry also uses the so-called LME price for aluminum as a reference price in supply contracts.
“An aluminum user pays the LME price plus a physical market premium, which in the U.S. is referred to as the ‘Midwest Premium.'”
Warehouse owners, largely Wall Street financial firms, began paying aluminum smelters to overproduce in an already oversupply market, Beer Institute’s letter explained.
“These stocks were sold through the LME instead of on the physical market.” It would then be placed in an LME warehouse. In addition, warrant holders whose metal was already in an LME warehouse were given financial incentives.
“The combined impact of these practices was to eliminate the LME system as a market of last resort, creating artificial shorts that had a dramatic effect on the price paid to access supply in the physical market.”
One impact is that “while tariffs are a logistical cost, the Midwest Premium increased in a manner that assumes metal from all countries, including domestically produced metal, is subject to the tariffs.”
One impact of this spike in the Midwest Premium, Beer Institute said, is to make the U.S. market more attractive to global producers, undermining Trump’s tariffs.
In addition, the letter protested the requirements for requesting exclusions from Trump’s tariffs on imported steel and aluminum.
It said the interim final rule “imposes and unnecessary burden on our members because it (1) does not permit trade associations to submit exclusion requests or statements in support of other parties’ requests, (ii) does not permit parties to submit exclusion requests with respect to a class of imported products and (iii)provides inadequate guidance with respect to the Department’s treatment of confidential information.
Beer Institute said allowing trade associations to submit consolidated requests would “reduce costs to affected companies, promote a speedier resolution of exclusion requests and more efficiently allocated Bureau of Industry & Security and other Department resources.”