Most primary aluminum trade contracts, including ours, are priced off the London Metal Exchange (LME) cash or three-month settlement, plus a negotiated premium that covers grade, logistics, and payment terms.
Why the LME Matters
The LME provides a transparent, exchange-traded benchmark for aluminum. Rather than negotiating a price from scratch on every order, buyer and seller agree on a premium above (or, less commonly, below) the LME reference for a given delivery date. This keeps pricing fair and easy to verify against a public source.
What Goes Into the Premium
The premium on top of LME typically reflects the ingot grade (such as P1020), packaging, the destination port, and the Incoterm used for the shipment. A CIF quote to a distant port will usually carry a higher premium than an FOB quote from the loading port, simply because it includes freight and insurance.
What to Ask Your Supplier
When comparing quotes, always confirm which LME settlement date the price is pegged to, whether the premium is fixed or floating until shipment, and what happens if the market moves significantly between contract signing and delivery.