WHAT IS THE US ALUMINUM TRANSACTION PRICE?
Platts MW US Aluminum Transaction price assessment has been a benchmark for 30 years in the North American aluminum market. The assessment reflects the spot physical value of 99.7% P1020 high-grade aluminum, in ingots, sows or T-bars, delivered, duty-paid plants in the US Midwest.
The price assessment is available in the longtime flagship Platts Metals Week, as well as in Platts Metals Daily and Platts Metals Alert services.
Metals Week began assessing US spot physical aluminum prices in 1972, when the Metals Week (MW) US Aluminum Market price assessment was adopted as the alternative to producer list pricing. The MW US Aluminum Market price was an all-inclusive, delivered price for primary aluminum determined through a survey of producers, traders and P1020 aluminum users such as rolling mills and extruders.
In 1984, when the London Metal Exchange added warehouses in the US, Metals Week launched the MW US Aluminum Transaction price assessment, which reflected a premium or discount to the LME cash settlement price. Since that time, the US Aluminum Transaction price assessment has been a benchmark used to price not only P1020 ingot, sow or T-bar, but also other products in the aluminum value chain such as billet, sheet, foil, extrusions, cable, cans and automotive parts.
The Transaction premium or discount is normalized to a US Midwest basis, but the assessment process encompasses trade data from all of North America. The Transaction price usage has extended beyond North America to other regions.
The premium or discount portion of the Transaction price reflects not only out-loading and delivery costs to consuming plants, but also the state of supply and demand in North America. Factors such as interest rates and the ability to finance aluminum on exchange futures price curves have also historically played a role in the level of the premium. As the US has become a net importer of P1020 aluminum for downstream consumption, the price level needed to attract imports has also set a floor.
HOW PLATTS ASSESSES THE TRANSACTION PREMIUM/DISCOUNT
Platts surveys the North American market daily to capture trades, bids and offers on a delivered Midwest basis. Data is normalized to reflect the typical price between the largest number of market participants, for delivery within 7 to 30 days from date of publication, net-30 day payment terms, for typical order quantities, chemistries and freight allowances.
The survey is extensive and encompasses both domestic and offshore producers, traders and brokers that are varied in scope, and consumers focused on different applications (extruders, remelt billet producers, sheet mills, rod mills, etc). End-users also add perspective on the market.
EVOLUTION OF PLATTS US ALUMINUM COVERAGE
The Platts US Aluminum Transaction price has evolved to be used as a benchmark in supply contracts between buyers and sellers of 99.7% P1020 grade as well as buyers and sellers of other primary grades, billet, sheet, scrap and downstream products. Contracts typically are structured as formulas that "float” and are invoiced each month using the Platts US Transaction monthly average. These formulas can reflect differentials to the Transaction average for freights or volumes that differ from the average, or for conversion charges into other products, discounts for scrap, offgrade, etc. Platts also monitors and reports on changes in these differentials.
In the early 1990s, the US Aluminum Transaction premium evolved to see over-the-counter financial swaps or derivatives trading. These typically settled against the monthly average. In 2011, the CME Group launched an exchange-traded financial swap product settling basis the Platts US Transaction premium monthly average, trading on COMEX. This began as a Clearport product and moved to the Globex platform in late 2012.
Since 1990, Platts has expanded its coverage of aluminum value-chain pricing to include P1020 premiums for other key global trading hubs (eg, Rotterdam, Japan), as well as the first daily alumina global price benchmark in 2010; global secondary aluminum alloy assessments such as the benchmark US A380 price for automotive parts; 10 US aluminum scrap assessments; and calcined petroleum coke for aluminum smelting.