Customers of CCL Container Inc. in Hermitage know that aluminum prices have tanked worldwide.
Not surprisingly, they ask for lower prices when buying aluminum bottles they'll fill with suntan lotion, hair spray, energy drinks and beverages.
“They want a price cut. It creates some confusion in the market, really,” said Charlie Herrman, CCL's vice president for sales and marketing.
The reality of the aluminum pricing market is complex.
The base price for aluminum ingot that Alcoa Inc. and others produce, set by the London Metal Exchange, is about $1,897 per metric ton, down from a 25-year high of about $3,100 in June 2008. But premiums paid in addition to the exchange price are at record highs, analysts say.
The premium — based on warehouse inventory levels, time in storage and transportation costs, and settled by metals analyst Platts — is negotiated quarterly by suppliers and buyers. It has led to some turmoil.
CCL Container uses about 24,000 tons of aluminum, making 560 million bottles annually. That equates to a premium of about 1.2 cents per bottle.
CCL Container and competitor Exal Corp. of Youngstown, Ohio, are the nation's largest makers of aluminum aerosol bottles. Exal claims the larger share of the 1.1 billion bottles sold each year.
Now CEO Mike Hoffman hopes Congress, lawsuits or regulatory changes will fix the pricing situation.
“We're all very upset about this situation,” Hoffman said. “It has to change; it's not sustainable.”
“(The price is) artificially driven, because there's thousands of tons of aluminum in these warehouses,” Hoffman said. With storage costs the banks charge, the longer it takes to move aluminum out, “the more money they make.”
London exchange figures show aluminum inflows are at the lowest rate in months, about 6,027 metric tons for August. So operators may be reducing backlogs, experts said.
Alcoa urged lawmakers last month to give the matter “further attention.”
The London exchange, Alcoa said, “does not provide the same quality of information and level of transparency as required by other commodities exchanges, such as those falling under the scope of the U.S. Commodity Futures Trading Commission.”
On Alcoa's website, CEO Klaus Kleinfeld warns: “The outcome of price determination that is not transparent is eventual lack of trust. People will look for alternatives.”
At least six class-action lawsuits have been filed against Goldman Sachs, JPMorgan and other warehouse operators, charging that they artificially inflated aluminum premiums and disrupted supplies.
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