A bipartisan group of Congressional members have called on the Department of Justice (DOJ) to investigate potential irregularities in the aluminum market, which they say are causing the price of the metal used in beverage cans to surge.
In the letter to Attorney General Jeff Sessions, U.S. Rep. Ken Buck (R-CO) and 31 additional congressional members pointed to “sharp increases” in the Midwest Premium — which represents the full logistics costs of shipping and storing metal in the U.S. — as the potential cause of aluminum pricing irregularities.
“We understand that purchasers of aluminum are encountering serious pricing irregularities and potential anti-competitive conduct by aluminum producers, merchants, traders, banks and others, which we feel warrant investigation by the Department of Justice,” the congressional members wrote.
According to the letter, although logistical costs of sourcing aluminum have not increased, the announcement of President Donald Trump’s 10 percent tariff on aluminum caused the Midwest Premium to spike. It has more than doubled in price, from around $.08 to more than $.20 per pound between August, 2017, and March 2018. They added that even though the U.S. has “record stockpiles of aluminum supply,” the price of aluminum “has spiked and fluctuated in ways that indicate market distortions caused by” the Midwest Premium.
“While the MWTP was intended to simply measure the base costs of storing and shipping aluminum, we are concerned that the price point is now being used as an instrument to artificially inflate prices, thereby enriching only specific producers, traders, and other market participants,” they wrote. “Bearing the brunt of these higher prices are the end-users of aluminum and those consumers who purchase products like soft drinks and beer. We urge the Department of Justice, specifically your Antitrust Division, to closely examine these issues and whether anticompetitive practices are occurring in the aluminum market.”
The letter comes one month after the Beer Institute, a national trade group representing the interests of large and small brewers as well as industry suppliers, called on the DOJ, the Department of Commerce and the Federal Trade Commission to investigate anticompetitive activity in the aluminum market. It also follows a Wall Street Journal op-ed in which Pete Coors, the chairman of Molson Coors Brewing, urged President Trump to end the Midwest Premium.
Beer Institute president and CEO Jim McGreevy applauded the letter on Monday, and pointed out that the Midwest Premium has increased by as much as 135 percent since January.
“In order to compete, American brewers need a fair and transparent pricing system for aluminum. Industries thrive when there is predictability and accountability in the metals market,” he said, via a press release. “The Department of Justice should investigate the unregulated Midwest Premium to ensure pricing irregularities and other unfair market practices do not disproportionately have a harmful effect on end users of aluminum.”
According to the Beer Institute, the beer industry spent about $2.7 billion on 36 billion aluminum cans and bottles last year. McGreevy has previously said the Trump tariffs could add about $347 million in costs to the industry and lead to the loss of about 20,000 jobs.
MillerCoors CEO Gavin Hattersley told Bloomberg last week that the company projects the tariffs will cost the manufacturer of Coors Light and Miller Lite about $40 million. MillerCoors buys about 500 pounds of aluminum annually and ships about 12 billion cans of beer, according to a New York Times piece published Monday.
According to Hattersley, the tariffs will force the company to scale back investments, hit the pause button on hiring new employees and possibly force it to increase beer prices.
The financial implications of the Trump’s tariffs on the U.S. beer industry pales in comparison to the administration’s threat of imposing tariffs on approximately $450 billion worth of imported Chinese goods, however.
Last Friday, the Office of the U.S. Trade Representative released a list of products that it plans to hit with a 25 percent tariff. Currently, the list does not include steel brewing equipment, according to the Brewers Association (BA).
“Items related to brewing are not included in these initial tariffs, but as negotiations between the U.S. and China continue, there is always a possibility that equipment used by the brewing industry could be affected,” the BA wrote on its website.