LME, QMJP, US Midwest and Rotterdam: How to Calculate a Commodity Price in 2026

Two ways a commodity price gets set

Every physical contract sits somewhere between two poles, and most confusion in commodity pricing comes from people on either side of a table assuming different ones.

Market-priced commodities take their reference from an exchange or a price reporting agency. The London Metal Exchange (LME) for aluminium, copper, zinc, nickel, lead and tin. The Shanghai Futures Exchange (SHFE) for the Chinese domestic market. CME/COMEX for US copper and for a growing list of premium contracts. For commodities without a liquid exchange — sulphur, urea, iron ore lump, most fertilizers, many minor metals — the reference is a published assessment from Platts (S&P Global), Fastmarkets or Argus. Nobody involved sets the number; they agree which number to use.

Fixed or administered prices are set by a government, a state producer or a quarterly negotiation, and they hold until somebody changes them. Indonesia publishes the HBA coal reference price and, since regulations effective 1 March 2025, requires domestic coal contracts to price off it. National oil companies publish Official Selling Prices (OSPs) monthly for crude and for by-products such as sulphur. Several producing countries fix domestic prices for fuel, fertilizer or power well below export parity. And some benchmarks sit in between: the Japanese aluminium premium is negotiated quarterly between buyers and suppliers, then fixed for three months — a market price with a fixed-price shape.

The practical difference is who carries the risk. Under a fixed price, the seller carries it between agreement and shipment. Under a formula, the buyer and seller carry it jointly, and the contract's job is to say exactly when and how the number is struck.

The formula, in the order you calculate it

A working physical price for an exchange-traded metal is built in four moves:

Written out, the shorthand a trader sends on WhatsApp — LME + QMJP ± $10 — expands to: the LME cash settlement averaged over the agreed quotational period, plus the Quarterly Main Japanese Port premium for the relevant quarter, plus or minus a differential the two parties argue about, on the stated Incoterm.

Which "LME price" did you actually agree?

"LME" on its own is not a price. The LME publishes several every day, and the gap between them is where money quietly moves.

• LME Official Price — the cash and 3-month prices struck in the second Ring session. The benchmark most physical contracts name.
• LME cash (spot) — settlement for delivery in two working days.
• LME 3-month — the rolling forward date the market actually trades.
• Monthly average — the arithmetic mean of official cash prices over a calendar month. The most common basis for term contracts, because it removes the argument about which day.

On 11 September 2026, LME aluminium cash was $3,274/t while 3-month closed at $3,250/t. Cash above forward is backwardation — the market paying a premium for metal now. That single detail changes the correct answer to "when should we price?", and it is worth more than most negotiating tactics.

The quotational period is the other half of the price

The quotational period (QP) says which days' prices count. Common choices are the month before the bill of lading (M-1), the month of shipment (M), the month after (M+1), or a defined range of days around arrival. In a flat market the choice is worth nothing. In the backwardated market of September 2026 it is worth real money, and in a fast-moving one it is the difference between a good trade and an argument. Agree the QP in the same sentence as the formula, never afterwards.

The premium is a separate market with its own price

The regional premium is not a rounding adjustment. In the United States in 2026 it has been worth more than half the metal. These are the three benchmarks quoted in almost every aluminium negotiation:

Europe quotes two premiums, not one: duty-paid and duty-unpaid. The gap between them is the EU's 3% import duty on unwrought aluminium of non-preferential origin. Metal that entered under a free trade agreement, or that has already cleared customs, carries the duty-paid number. The same physical ingot in the same shed can be worth two different prices depending on a customs status you cannot see by looking at it.

Where fixed prices still rule

Market pricing is not universal, and assuming it is will cost you a tender.

Indonesia's HBA is the clearest example. The Ministry of Energy and Mineral Resources publishes a benchmark coal price and the market prices against it by calorific value: for the period beginning 16 March 2026, HBA1 at 6,322 kcal/kg GAR was $103.43/t, HBA2 (5,300 kcal/kg) $77.71/t, HBA3 (4,100 kcal/kg) $52.84/t and HBA4 (3,400 kcal/kg) $38.30/t. The HBA also drives royalty and tax calculations, which is precisely why it is administered rather than assessed.

Elsewhere: state producers publish monthly or quarterly OSPs that buyers take or leave; several Gulf and Central Asian producers sell on annual fixed-price frame agreements; and domestic fertilizer, fuel and power prices are capped in dozens of jurisdictions, which is why export parity and domestic price can differ by a factor of two in the same country on the same day.

When a fixed-price regime meets a market-priced buyer, the arbitrage is structural rather than clever — and it is usually regulated, taxed or licensed precisely because it is so obvious.

Worked example: one cargo, three destinations

Take 500 tonnes of P1020A aluminium ingot from a Gulf smelter, priced on LME cash at $3,274/t (11 September 2026) and the premium benchmarks above. Ignore the negotiated differential for a moment.

The same metal, the same day, a $915,000 spread on 500 tonnes. Now add the negotiated differential: at ± $10/t it moves the invoice by $5,000 either way. That is small against the premium and very large against a broker's fee — which is why the last ten dollars are argued over hardest, and why intermediary margin so often lives there. We cover that side of it in how commodity brokers get paid.

Which of those gaps is arbitrage, and which is not

This is the part that separates a trader from a spreadsheet.

The US gap is mostly not arbitrage. The Midwest premium has been driven by Section 232 tariffs at 50% since June 2025. The premium is largely the tariff passing through to the buyer. You cannot capture it by shipping metal there, because you pay the tariff to get in; you capture it only if you already hold duty-paid or domestically produced metal. A tariff is not an arbitrage, it is a toll.

The Japan–Rotterdam gap is arbitrage, and it is small. About $110/t separated the two on 8 September 2026. Freight from the Gulf to Japan against freight to Rotterdam eats most of that, and the rest is credit and timing. This is a genuine netback decision: the smelter sells where the delivered value net of freight is highest, and that choice is what keeps the two premiums tethered.

The LME–SHFE import window is the arbitrage most watched in the market, and the one that decides whether metal sitting in Australia is worth shipping to China. Traders track it as two numbers, both published daily by Shanghai Metals Market (SMM): the Shanghai–London ratio (沪伦比价, the SHFE price divided by the LME price) and import profit and loss (进口盈亏, the same comparison expressed in yuan per tonne once costs are added).

The calculation is not a simple subtraction. Price reporting agencies compute the physical import arbitrage using the SHFE front-month contract against the LME 3-month price at 3pm Shanghai time, then adjust for the exchange rate, China's 13% VAT, the physical premium and any import duty — which is zero for copper and aluminium, 1% for zinc and 2% for nickel. When the Shanghai price clears all of that, the window is open, Chinese buyers pull units, and material that was heading for Southeast Asia or Rotterdam turns east. When it shuts, the flow reverses within days.

Two practical points. First, the window is usually open for days rather than months, which is why the arbitrage rewards whoever already has metal in position rather than whoever spots it first. Second, copper is the liquid arbitrage metal and aluminium is not: Shanghai bonded warehouses hold substantial copper stock that can move between bonded and onshore status as the ratio shifts, while bonded aluminium and nickel inventory is thin, so the trade is harder to execute even when the numbers look right.

Time arbitrage lives in the curve. Contango — forwards above cash — pays you to hold metal, financing the carry out of the spread; that is how financing deals on warehouse stock work. September 2026's backwardation does the opposite: it penalises holding and drags units out of warehouses, which is a supply signal disguised as a spread.

Quality arbitrage is the quietest of the four: P1020A against alloy, ingot against sow or billet, brand against brand. Two cargoes can price off the same LME and still differ by $150/t on the specification and the registration of the brand alone.

Ten words that change the number

Most pricing disputes are not disputes about the market. They are disputes about wording agreed too quickly. Before you sign a market-priced contract, make sure it names:

• Which price — LME Official cash, 3-month, settlement or monthly average.
• Which quotational period — M-1, M, M+1, or defined days; average or single date.
• Which premium series — the publisher matters. Platts, Fastmarkets and Argus assess the same market and do not always print the same number.
• Duty status — duty-paid or duty-unpaid, and who is importer of record.
• The Incoterm and named place — FOB, CFR, CIF, DAP each move a different set of costs. See our guide to what DAP means under Incoterms 2020.
• Weight basis — bill of lading weight, discharge weight, franchise and tolerance.
• Price fixation windows — who may declare, by when, and what happens if nobody does.
• Provisional and final invoicing — the percentage, the trigger, and the settlement date.
• Currency and conversion — rate source and date, if the invoice is not in the quotation currency.
• Who hedges — and who pays if the hedge and the QP do not match.

Unfamiliar with a term in that list? Our commodity trading glossary defines the contract and payment vocabulary, from LOI and ICPO through to T/T payment terms.

Sources

LME aluminium cash and 3-month closing prices for 11 September 2026 from London Metal Exchange published data. QMJP quarterly premium settlements from Fastmarkets and market reporting on the Q1 2026 ($195/t), Q2 2026 ($350–353/t) and Q3 2026 ($395/t) rounds, with the Q4 2025 settlement at $86/t. Rotterdam P1020A in-warehouse duty-paid assessment of $490–520/t for 8 September 2026 and the May–August decline from market reporting. US Midwest premium milestones — 90 cents/lb in December 2025, $1.0095/lb on 23 January 2026, a record $2,182/t in late February 2026 — from S&P Global Commodity Insights reporting, with Section 232 tariffs at 50% since June 2025. Indonesian HBA benchmark values for the period from 16 March 2026 and the 1 March 2025 contract regulation from Indonesian Ministry of Energy and Mineral Resources announcements.

Premiums move daily and quarterly benchmarks settle on their own calendar. Every figure here is dated. Check the live assessment before you price a cargo against it.