CFTC pushes U.S. aluminum pricing reform to ease brewer input costs

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CFTC pushes aluminum pricing reform

Highlights

CFTC Chairman Rostin Behnam says the agency is examining whether additional U.S.-based aluminum contracts could improve price discovery and risk management for manufacturers.
The Midwest premium, assessed at about $1.10 per pound versus an LME benchmark near $1.40 per pound, brings U.S. aluminum costs to roughly $2.50 per pound for buyers.
Behnam suggests CFTC is exploring both new domestic contracts tied to U.S. delivery and potential blockchain-based solutions to lower warehousing and collateral costs in metals markets.

Regulator reviews aluminum pricing structure

As reported by the Commodity Futures Trading Commission, Chairman Rostin Behnam says the agency is examining how aluminum pricing mechanisms affect American manufacturers and whether additional U.S.-based contracts could improve price discovery and hedging. In remarks to the Beer Institute's annual membership meeting, he says the current system leaves buyers exposed because the London Metal Exchange benchmark and the Midwest premium do not always match the actual cost and origin of metal delivered into the U.S.

He says the Midwest premium, assessed by S&P Global, has become a significant part of aluminum costs for domestic buyers. Using figures cited in the speech, the premium is about $1.10 per pound versus an LME benchmark near $1.40 per pound, taking the all-in U.S. price to roughly $2.50 per pound.

The CFTC does not set aluminum prices or production levels, but it does oversee derivatives markets and can assess whether current market infrastructure serves commercial users. Behnam says one option is to consider additional U.S.-based aluminum contracts tied more closely to domestic delivery, while stressing that any new contract would need broad participation from producers, consumers and other market participants to be effective.

He also says the agency is looking at recycled aluminum as a separate area for derivatives market development. Better risk-management tools would not solve every supply chain problem, he says, but they could help recyclers and manufacturers manage volatility and make investment decisions with more confidence.

Potential impact on manufacturing and market competition

Behnam frames the issue as part of a wider push to strengthen American industry, arguing that businesses need market tools that reflect their commercial needs rather than adapting to benchmarks built around other regions. He says a beverage can maker that can better hedge aluminum costs, or a brewer with more predictable packaging expenses, is in a stronger position to plan production and invest in workers, facilities and products.

He says the U.S. should be willing to challenge existing arrangements if they are not serving commercial users as well as they could. In that context, London remains important in global metals trading, but the chairman argues that deep U.S. financial markets and exchange infrastructure could support additional benchmarks or contracts better suited to domestic physical delivery.

The speech also highlights tokenization as a possible longer-term way to reduce warehousing and collateral friction in commodities markets. Behnam says blockchain-based systems could allow faster settlement, more flexible lot sizes and more transparent warranting, potentially lowering costs for smaller warehousing participants and improving efficiency across the supply chain.

We have also analyzed the CFTC’s proposed crypto exchange framework aimed at extending federal oversight to more digital asset activity.

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