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The Truth Behind the Midwest Premium

The Midwest Premium (MWP) is a textbook example of a market that lacks competition, transparency and oversight.

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For a commodities market to function properly, three components are absolutely necessary:



Without sufficient competition, a market will devolve into a monopoly.



Without adequate transparency, consumers have no way of knowing if the price they pay is fair or if it has been arbitrarily manipulated.



Without appropriate oversight, markets can be unduly influenced by monopolistic behavior.

Though defenders of the status quo like to claim the Midwest Premium (MWP) is merely an independent assessment of the price of aluminum, the reality is that the MWP is a black box that raises prices for consumers while leaving them in the dark.


U.S. businesses that use cansheet aluminum, such as the beverage industry, purchase aluminum by paying a Midwest Transaction Price (MWTP). The MWTP consists of the base price for aluminum metal AND an additional premium on top of the base price. This additional cost is known as the Midwest Premium (MWP).
The MWP is calculated through a “complex,” non-transparent benchmarking method effectively controlled by a single company.
In 2018, the U.S. government imposed tariffs on aluminum imported from other countries. Since implementation of aluminum tariffs, U.S. brewers’ total price for aluminum has skyrocketed. Tariffs reverberate through the supply chain, raising production costs for end-users and ultimately impacting consumer prices.
No. Starting in 2019, the U.S. government has repealed the tariff on certain nations, including Canada. Additionally, domestically recycled scrap aluminum, which is the source of more than 70% of cansheet, is not subject to Section 232 tariffs. However, the Midwest Premium is calculated so that aluminum end-users ultimately pay a tariff-laden cost regardless of the country of origin or the amount of recycled content used.
Because the MWP is calculated in a non-transparent, non-competitive manner, and therefore purchasers of cansheet aluminum are being forced to pay a tariff-burdened price on all aluminum, regardless of whether it is actually subject to Section 232 tariffs.
Since the Section 232 tariffs went into effect in March 2018 to January 2023, America’s beverage industries paid $1.893 billion ostensibly because of Section 232 tariffs for aluminum cansheet. However, during the same time, the U.S. Treasury only collected 7% of this sum totaling about $126 million. According to HARBOR Aluminum, a staggering $1.767 billion (or 93 percent) was captured by U.S. rolling mills, U.S. smelters, and Canadian smelters. These entities have capitalized on the lack of regulatory oversight, charging the full tariffed price on all aluminum even when it is exempt from Section 232 tariffs.

What can be done to fix this? 

Repealing Section 232 tariffs on imported aluminum would provide immediate relief to purchasers of aluminum. Specifically, the APEX Act is a legislative remedy that addresses the problems with the MWP and the U.S. aluminum market:


Increased Midwest Premium Oversight Helps Consumers

Because of the Midwest Premium, companies in the aluminum supply chain charge the full tariffed price on all aluminum, regardless of whether it is subject to tariffs or not, hurting end-users and ultimately consumers.

The MWP has had a significant financial impact on the American beverage industry, which has paid nearly $1.9 billion in taxes since the Section 232 tariffs went into effect. However, of this vast amount, only $126 million (or approximately 7 percent) actually went to the U.S. Treasury. If federal regulators were empowered to increase oversight of how the MWP is benchmarked, there would be increased competition and transparency in U.S. aluminum markets.

With increased transparency in aluminum markets, purchasers would no longer be forced to pay tariffs on aluminum that should not be subject to them and competition would increase.

The result of this process would be lower prices for consumers on goods made with aluminum, such as cans, automobiles and more.