Mark O. Stutrud: America's beer industry needs transparency in the aluminum market – Here's why
When most people think of beer, they think of barley, hops, yeast and water. But it is, in fact, aluminum that is the biggest commodity cost for our nation’s brewers.
I read with great interest the recent piece on FoxBusiness.com by S&P Global Platts’ President Mr. Martin Fraenkel. As he is based in the United Kingdom, and I am in Minnesota, I hope the next time he finds himself in the United States he drops by our brewery so he can meet firsthand the eighty-two individuals who devote their livelihood to Summit Brewing.
Instead of denigrating America’s vibrant beer industry, I’d hope he’d be open-minded in understanding the impact of the $180,000 increase in aluminum costs Summit faced last year.
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I would also invite him to join me in enjoying beer, which remains America’s most popular alcohol beverage.
Summit Brewing—much like brewers across the United States—is putting more and more of our beer in aluminum cans. Although we have been in business for thirty-four years, we have only been packaging our beer in cans for less than six years. To date, canned beer is 37 percent of our total sales.
When most people think of beer, they think of barley, hops, yeast and water. But it is, in fact, aluminum that is the biggest commodity cost for our nation’s brewers. Today, more than 60 percent of all the beer brewed and sold in the United States is packaged in aluminum, and the American beer industry annually purchases more than 36 billion aluminum cans every year.
As a business owner, I don’t want special treatment—I just want to make sure I am paying a fair price for everything that I buy, and that the prices reflect market fundamentals.
However, brewers across the United States are seeing their aluminum costs skyrocket. Unfortunately, due to the combination of recently imposed tariffs on imported primary aluminum and a complicated, obscure pricing system known as the Midwest Premium, the cost of aluminum beverage cans has increased dramatically.
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In March 2018, President Trump imposed a 10 percent tariff on imported aluminum. America’s beverage industries paid an additional $458 million on the 2.33 million metric tons of aluminum purchased between March 2018 through July 2019 purportedly because of the tariff. However, a recent analysis conducted by a leading economic firm shows that the U.S. Treasury only collected 16 percent of this sum totaling about $73 million.
Why? Under current law, there is no direct oversight authority by a federal agency overseeing the Midwest Premium. As a result, companies like mine have to pay a Midwest Premium, including the tariff, even though most of the aluminum we buy isn’t actually subject to any tariff.
Most of the aluminum sold in the United States comes from Canada, a country that is not subject to the tariff. In the case of aluminum can sheet, most is not subject to a tariff because it is made from recycled scrap aluminum.
Despite this fact, brewers like myself are still charged the full “tariff-paid” premium, which has resulted in increased costs to thousands of American brewers throughout the county. Even more outrageous, so long as the U.S. needs to import aluminum, even negligible amounts, from countries subject to tariffs, all aluminum, including recycled aluminum already in the United States, is priced as though it is tariffed.
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Even President Trump’s administration recognizes issues with the aluminum market. U.S. Commerce Secretary Wilbur Ross recently said, “The fact of aluminum’s price going up does not seem to justify a huge increase in the Midwest premium.”
As a brewer, we are subjected to multiple layers of oversight, which, while a bit painful I understand is necessary since it ensures everyone in the brewing industry remains honest.
The Aluminum Pricing Examination Act makes sure that we shine a little light on the entities that benchmark aluminum premiums. It does not, as Mr. Fraenkel states, enable the federal government to set the price of aluminum.
Members of Congress from across the ideological spectrum have backed the legislation because they understand that it is time to provide some oversight to this opaque system. If S&P Global Platts is operating in good faith, then a little transparency on their system will only vindicate them.
Instead of blasting a vibrant American industry from a far-away office, I hope Mr. Fraenkel will take a moment to understand brewers do not want a handout. We understand the competitiveness of the industry and work every day to provide our customers with a wide array of beers to meet this demand.
We want an honest playing field from the entities we depend, so America’s beer industry can continue to support more than 2.1 million jobs and provide more than $328 billion to our nation’s economy.
Mark O. Stutrud is the founder and president of Summit Brewing Company in St. Paul, Minnesota.
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