A group of firms including Coca-Cola has alleged that Goldman Sachs is manipulating the metals market by only releasing metals that it holds in certain amounts, which artificially inflates prices, according to the WSJ, via Huffington Post.
In the past few years, Goldman (and other banks) have bought up metals warehouses, which allows them to determine how much metal they release to customers and when they do it.
Now the London Metals Exchange is looking into accusations that this not only allows Goldman to inflate prices, but that Goldman’s action does inflate prices.
According to the WSJ, “aluminium users and market traders… say operators of warehouses, which also include J.P. Morgan Chase & Co. and Glencore International PLC, should be forced to allow the metal out more quickly to meet demand.”
The complaining companies single out Goldman as the worst offender. (On a similar note, Goldman was recently fined for manipulating the oil market.)
Goldman owns the biggest warehouse complex in the LME system. It’s located in Detroit.
And Coca-Cola and the other angry users say Goldman “in particular is allowing the minimum amount of aluminium allowed by the LME—1,500 metric tons a day—to leave its facilities, and that [Goldman] could remove much more, erasing supply bottlenecks and lowering premiums for physical delivery in the process.”
Since Goldman bought the complex, “the wait time for aluminium delivery in Detroit has jumped to to about seven months,” according to the WSJ.
According to to Coco-Cola’s strategic procurement manager, Dave Smith, “It takes two weeks to put aluminium in, and six months to get it out… The situation has been organised artificially to drive premiums up.”
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