Goldman and LME face metal monopoly suit

Michael Bow
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WALL Street titan Goldman Sachs and the London Metal Exchange (LME) were yesterday forced to deny allegations they rigged aluminium prices by slowing deliveries of the crucial metal to businesses.

Both have been named as co-defendants in a lawsuit brought by US manufacturer Superior Extrusion over allegations of “anticompetitive and monopolistic behaviour” in warehousing the metal, according to legal papers filed on 1 August.

The case alleges Goldman and LME restrained about 1.5m tons of aluminium at warehouses in Detroit – more than 75 per cent of LME aluminium stored in the US ­– to prosper from ballooning prices caused by the bottleneck.

Goldman’s subsidiary Metro International, which it bought in 2010, stores aluminium in giant warehouses in Detroit. The LME authorises warehouses around the world to hold aluminium and collects a small cut of the rent.

“We believe this suit is without merit and we intend to vigorously contest it,” a Goldman spokesman said yesterday. “I would also note that aluminium prices are down 40 per cent from their peak in 2006.”

LME owner Hong Kong Exchanges and Clearing last night said: “LME management’s initial assessment is that the suit is without merit and LME will contest it vigorously.”

The lawsuit follows US senate testimony from Tim Weiner, an executive at Chicago-based brewer MillerCoors, on 23 July alleging that warehouse practices had inflated global aluminium prices by $3bn (£1.96bn) since last year.

The dispute follows an investigation by journalist David Kocieniewski which revealed warehouse customers wait 16 months on average for their aluminium orders to be received – a tenfold increase on the waiting time in 2010.

US regulators are now thought to have launched a preliminary probe in the warehousing practices following the revelations.

The LME, located on Leadenhall Street in the City, launched a consultation last month to cut queues at warehouses where customers have to wait more than 100 days for aluminium to ship.

Aluminium for three-month delivery on the metal exchange last month traded up to $1863 per tonne. It closed at $1809 per tonne on Friday.

UK-based aluminium storage warehouses have fared better than their US counterparts.

Liverpool-based Henry Bath & Son, which is owned by JP Morgan and has been put up for sale by the bank, currently has no customer queues.