Commodities are ubiquitous in everyday American life. We drive cars built of aluminum, drink coffee each day and wear clothes made of cotton. But when it comes to pricing, they aren’t all created equally—even within the same commodity market. Location affects commodity prices, and those differences in prices based on location are called “differentials.” When market fundamentals are balanced, such differentials generally maintain a steady ebb and flow. But they can swing to far extremes when dramatic local or regional events upset the equilibrium. From oil to wheat, or gasoline to metals, no commodity is immune to the impacts that regional dynamics can have on local spot pricing. Recently, we’ve seen the price of metals impacted by geopolitical actions. The S&P Global Platts Midwest Aluminum Transaction Premium is a differential—that is, the cost difference between aluminum sold in the United States and aluminum sold elsewhere in the world. Like oil benchmarks, this price reflects what buyers and sellers pay for aluminum in the physical market. The differential reflects regionally specific supply-and-demand conditions in the United States, as well as the regional cost of logistics, such as truck freight rates. Sanctions and tariffs affect regional aluminum markets. For much of 2018,… continue reading
Continue reading Location is everything — especially with commodity pricing. This article appeared first on CTRM Center.
Source: CTRM Center