Sun, Aug 04, 2013 - Page 13 News List

Goldman Sachs sued over aluminum supply claims

Bloomberg

Goldman Sachs Group. and the London Metal Exchange (LME) are restraining aluminum supplies and driving up the metal’s price in violation of federal antitrust law, according to a lawsuit.

The suit, for which the aluminum products company Superior Extrusion seeks class-action status, was filed on Thursday in federal court in Detroit.

“Through an interconnected series of agreements in unreasonable restraint of trade, Goldman and LME restrained approximately 1.5 million tons of aluminum in LME Detroit warehousing,” causing delays of as long as 16 months between customer orders and corresponding deliveries, Michigan-based Superior said.

Buyers in Michigan, Ohio, Illinois and elsewhere in the US Midwest suffered harm in the form of inflated prices, according to the complaint. The plaintiffs asked for an order barring the practice and money damages tripled under US antitrust law.

“We believe the suit is without merit and will contest it vigorously,” Michael DuVally, a spokesman for New York-based Goldman, said on Friday in a phone interview. The market price for the metal has fallen about 40 percent since 2006, he said.

Chris Evans, a spokesman for the LME in London, did not immediately respond to an e-mail on Friday after regular business hours seeking comment on the lawsuit.

Aluminum buyers from beer makers to wire fabricators have complained that owners of London Metal Exchange warehouses, including banks, are manipulating availability of supply.

Global aluminum costs were inflated by US$3 billion in the past year through unfair rules that allow warehouse owners to slow deliveries, Tim Weiner, a global risk manager at Chicago-based brewer MillerCoors, said in written testimony before his appearance on July 23 at a US Senate subcommittee hearing.

The practices of warehouse owners authorized to hold aluminum by the LME created artificial limits on available supply, leaving prices “inflated relative to the massive oversupply and record production,” Weiner said.

The premium added to aluminum for immediate delivery on the LME rose in recent months as warehouse operators offered incentives to attract aluminum into storage, forcing consumers of the lightweight metal to compete with them.

In February 2010, Goldman Sachs Group. bought Romulus, Michigan-based Metro International Trade Services — a defendant in the Superior complaint — which as of Jul. 11 operated 34 of 39 storage facilities licensed by the LME in the Detroit area, according to exchange data.

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