Yahoo Finance reports in “Goldman’s new money machine: warehouses” that “a string of warehouses in Detroit, most of them operated by Goldman, has stockpiled more than a million tonnes of the industrial metal aluminium,” totaling “about a quarter of global reported inventories.”
See if you can guess where this story goes from here (hint! Goldman does something unethical to the markets to make more cash)…
So…Goldman purchases, then stores in Detroit, millions of tons of the world’s aluminium supply; not only does Goldman store all this metal in America’s wasteland, but it holds it…and holds it…and holds it a bit longer. After having taken in a quarter of the world’s aluminium supply into its warehouses, Goldman then lets it trickle out of these storage units at an arguably criminal pace, thereby driving up demand, and ergo prices, ultimately “creating a supply pinch for manufacturers of everything from soft drink cans to aircraft.” Who pays? Well…as in most Goldman-related cases…everyone.
In fact, “the resulting spike in prices has sparked a clash between companies forced to pay more for their aluminium and wait months for it to be delivered, (and) Goldman, which is keen to keep its cash machines humming.” Experts assert that this single market-manipulation has driven up aluminium prices by at least $20-$40/ton; a further (non-manipulated) increase in demand by the world’s “new” middle classes means Goldman’s turned these desolate storage unites into a gold-mine.
Furthermore, the world of bank financing deals is leading to even higher prices. These deals, “which are estimated to have locked up about 70 per cent of the 4.4 million tonnes of the metal sitting in LME-registered warehouses around the world,” have further driven ME inventories to a historic 4.7 million tons (as of this past May).
So how much does all this market manipulation and metals lock-up mean, profit-wise, for Goldman Sachs? The London Metal Exchange reports that “the current maximum rent is 41 cents (U.S.), per day/per ton.” Consequently, “at that rate, Goldman’s warehouse operation in Detroit — said to be holding more than 1.1 million tonnes (of aluminium) — could be generating as much as $451,000 per day or about $165 million a year in revenue” for the investment bank.
Thus far, little has been done to curb Goldman’s egregious hoarding-for-profit behaviour. Earlier this year, the consulting firm Europe Economics “recommended the exchange raise its minimum delivery rates,” while “earlier this month the exchange announced a new regime for operators with stocks of over 900,000 tonnes in one city.”
Experts acknowledge, however, that these changes have had little change on either Goldman’s or the market’s behaviours and prices.
Ultimately, it looks like Goldman’s manipulating the (metals, this time) markets. Again. Pushing a profit tide that doesn’t look like it will change direction any time soon. So… the next time you swig a sip from a soda can…or b1tch about the price of your airline ticket…or notice that redoing the outside of your house this time is far more expensive than the last…
You have the good folks at Goldman Sachs to thank. At least they’re making a gold mine off all this.