In part one, we discussed the continuous decline of the LME aluminum price along with sharp increases in the Midwest Premium. Today, aluminum buyers can no longer afford to base their analyses solely on the price of aluminum. The aluminum price no longer represents what customers are paying for their purchases.
The mix of two price benchmarks is not an ideal situation. On top of that, market players can no longer make valuable assumptions on the cost of aluminum in the Midwest since there is no market with transparent supply and demand that determines the price.
Why should buyers use two charts when they just need one? The CME Group intends to fix this, in a transparent and balanced way, with its new all-in contract. If the contract is successful, aluminum buyers will be able to use a single price as the actual benchmark without the worries of warehousing and speculative actions.