Unlike with other commodities like oil, determining the price of aluminum encompasses more than simply the cost of the raw material.
First, it’s important to understand the three factors that influence the price of aluminum.
- The Commodity. This is cost of the raw material and traded on the London Metal Exchange.
- The Premium. For the U.S., this is S&P Global Platts Midwest Premium. It is a regional differential to the global price of aluminum. It is impacted by the regional cost of logistics,and supply and demand conditions in the U.S.
- The Conversion. This is the price that mills charge to convert the commodity to usable product. The price is driven by capacity availability and competition.
And that is where the story of how market factors have influenced the pricing of aluminum begins. Check out the video below: