Brewer frustration over aluminum tariffs comes to a head
A shipping and handling charge that aluminum buyers pay has doubled since the beginning of the year, leaving brewers — who were already crying in their beer over tariffs on aluminum imports — even more upset.
The Beer Institute this week asked U.S. Attorney General Jeff Sessions to investigate what it calls “pricing irregularities” related to the Midwest premium, a charge that aluminum buyers pay on top of the price of the metal to cover storage and shipping costs.
The Washington, D.C., trade
“There has been a lot of speculative activity ... so the price of steel and for a while the price of aluminum went up far more than is justified by the tariffs.” — Wilbur Ross, commerce secretary
group told Mr. Sessions that the premium has more than doubled recently to over 20 cents a pound — “despite the fact that logistical costs of sourcing metal from around the world have not moved significantly.”
The brewers group believes S&P Global Platts, the company that determines the premium after assessing market conditions, is artificially inflating its price.
S&P said the 10 percent tariffs President Donald Trump imposed on aluminum imports in March, as well as trade sanctions the White House proposed on Russian aluminum maker Rusal, are behind the increase. Rusal is the world’s second largest aluminum producer and a significant exporter to the U.S., S&P said.
The tariffs raise the price of imported aluminum. Curbing imports from Rusal reduces supply, putting more upward pressure on prices.
“The Midwest premium is simply reflecting this unique market dynamic,” S&P said in an emailed statement.
Prices for common grades of aluminum not readily available from U.S. producers have jumped from about $1.80 per pound prior to the tariffs to about $2 to $2.25 per pound, according to a Midwestern metals distributor who did not want to be identified.
Aluminum industry analysts agree the tariffs are the major reason the surcharge has doubled. But the man implementing Mr. Trump’s import initiative told the Senate Finance Committee on Wednesday that some “illegitimately are profiteering” on those tariffs as well as the 25 percent tariffs imposed on steel imports.
“There has been a lot of speculative activity ... so the price of steel and for a while the price of aluminum went up far more than is justified by the tariffs,” Commerce Secretary Wilbur Ross told the panel.
Aluminum prices spiked earlier in the year but collapsed in April when the White House extended the deadline for Rusal to comply with the sanctions from June 5 to Oct. 23.
The extension gave aluminum buyers four more months of access to a significant supplier. Lloyd O’Carroll, an independent metals industry analyst based in Richmond, Va., said the Midwest premium could jump to more than 30 cents per pound if the sanctions on Rusal go forward.
Mr. O’Carroll said the tariffs on aluminum imports are the main reason why the Midwest premium has doubled, but there are other factors.
“The market is tighter. Demand is growing,” he said.
Further crimping supply is the fact that U.S. aluminum producers have been slow to take advantage of tariff-induced higher prices to restart idle capacity, Mr. O’Carroll said.
S&P said it sets the Midwest premium by surveying aluminum buyers, sellers, traders and end users, “using a consistently applied and transparent methodology.”
That’s not the way Beer Institute president and CEO Jim McGreevy sees it.
“For much of the last 10 years, it’s never really tracked with the market fundamentals,” he said in an interview. “It’s set by one company, largely in secret, with disproportionate input from the producers and traders.”
Mr. McGreevy estimated that the tariffs and premium will cost brewers $347 million and that the industry could lose as many as 20,000 jobs.
One New Jersey craft brewer recently told him that higher aluminum prices have erased more than half of the benefits the brewer realized from excise tax reductions enacted in December as part of Mr. Trump’s tax cuts.
Mr. O’Carroll said there is no doubt beer makers are paying more for aluminum, but the impact isn’t that dramatic.
“They are paying higher for the cans than they otherwise would. But the cost of a can is a little over a penny,” he said.