CHICAGO Jupiter Aluminum Corp. blasted current pricing models based on the London Metal Exchange and Midwest premium, claiming they no longer reflect supply and demand fundamentals.
Current prices are based on the LME price plus Midwest premium, along with additional product premiums or fabrication surcharges.
A new pricing model is necessary because in recent years the LME has been "disconnecting itself from the usual physical supply-and-demand equilibrium," company president Paul-Henri Chevalier said in a letter to customers April 7.
In addition, recent Midwest premium increases over the LME "did not sufficiently offset the spread squeeze faced by the secondary aluminum producers," he said.
"While we need to develop a new pricing model, there is an immediate need to compensate for the drastic spread squeeze," Chevalier said.
As such, the Hammond, Ind.-based company has increased a mill finish surcharge by 5 cents per pound and painted surcharges by 2 cents per pound above the mill finish surcharge for 3,000-series alloys, noting that the move is necessary because of tight scrap spreads.
Jupiters call for an alternative pricing model echoes comments made in a recent price increase announcement by Mount Holly, S.C.-based specialty flat-rolled aluminum supplier JW Aluminum Co. (amm.com, April 4).
Secondary producers face increased competition for scrap as companies look to boost recycled content (amm.com, Jan. 15). Jupiter Aluminums products are 100-percent scrap based, according to its website.