Goldman Sachs faces probe over fixing aluminium prices
The Commodity Futures Trading Commission has issued subpoenas to Goldman and owners of other major warehouses as part of its inquiry into irregularities in the aluminium market that are believed to have cost consumers billions of dollars since 2010.
The subpoenas seek documents, emails, correspondence, voice recordings and other records concerning the warehouse operations dating back to January 2010, according to two people familiar with the documents. They also demand documents and correspondence regarding the London Metals Exchange, a private trade association that regulates warehousing.
Goldman bought Metropolitan International Trade Services, a string of Detroit-area metals warehouses, in 2010 and soon afterward beverage makers and manufacturers began complaining the company was restricting outflow of metal and causing lengthy delays in delivery. Those waits, which grew from six weeks in 2010 to around 16 months now, mean higher storage costs for metal owners, who are charged rent by the day.
Because of a quirk in the formula used to set the price of aluminium on the spot market, the delays also increase the prices nearly all manufacturers pay even when they buy metal not stored in a warehouse.
Industry analysts and beverage makers estimate long queues cost manufacturers and consumers more than $US5 billion ($5.45b).
Federal regulators began examining the metals warehouses last month, after The New York Times reported Metropolitan had been paying metal owners an incentive to move their aluminium from one warehouse to another, which contributed to the delays. Goldman president Gary Cohn recently said its warehouse subsidiary did not violate any laws or regulations and never sought to inflate prices.
Beverage manufacturers and the aluminium sheet supply company Novelis have asked the Justice Department to look into whether the warehouse operations violated antitrust laws.
Frequently Asked Questions about this Article…
US federal regulators have subpoenaed Goldman Sachs as part of an inquiry into complaints that its metals warehouses intentionally created delivery delays that inflated aluminium prices. The probe focuses on whether warehouse practices restricted outflow and contributed to higher storage costs and spot-market pricing since Goldman bought Metropolitan International Trade Services in 2010.
The Commodity Futures Trading Commission (CFTC) has issued subpoenas to Goldman Sachs and other warehouse owners, and beverage makers and the aluminium sheet supplier Novelis have asked the US Justice Department to examine potential antitrust violations. The CFTC’s action followed reporting that raised concerns about warehouse operations.
The subpoenas seek documents, emails, correspondence, voice recordings and other records related to warehouse operations — including communications about the London Metals Exchange — dating back to January 2010, according to people familiar with the subpoenas.
Goldman Sachs acquired Metropolitan International Trade Services, a network of Detroit-area metals warehouses, in 2010. Shortly after the purchase, beverage makers and manufacturers complained the company was restricting metal outflow and causing lengthy delivery delays.
Delays increase storage time and daily rent charges for metal owners, raising owners’ costs. Because of a quirk in the formula used to set aluminium spot prices, congested warehouses and long queues can push up the prices almost all manufacturers pay — even for metal not stored in those warehouses.
Industry analysts and beverage makers estimate that long queues and related warehouse delays have cost manufacturers and consumers more than US$5 billion (about $5.45 billion) since 2010, according to the article.
Goldman’s president Gary Cohn said the firm’s warehouse subsidiary did not violate any laws or regulations and never sought to inflate prices, according to the article.
Investors should monitor CFTC and Justice Department developments, any regulatory findings or legal actions, and disclosures from Goldman Sachs about the subpoenas. These updates could affect reputational risk and potential legal or financial outcomes, so keeping an eye on official filings and news is prudent.
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