The two-year US Senate investigation into banks’ commodities business has thrown a sharp light on the relationship between metals warehouses and their owners, the Financial Times reported.
A 403-page document released on Wednesday alleges Goldman Sachs Group’s 2010 purchase of Metro International Trade Services, a Detroit warehouse operator, led to rising aluminum prices as the company paid incentives to holders of the metal to shuffle it between warehouses, artificially increasing the length of queues and creating the impression of strong demand.
It also alleges that Goldman executives and traders had access to information about Metro’s operations.
In a series of 6 “merry-go-round deals” the Senate report detailed how soon after Goldman took over Metro it offered incentives to Deutsche Bank, Red Kite, a London-based hedge fund, and Glencore to cancel warrants – legal title to specific lots of metal – to place aluminum in a queue to ship it out, and then deliver it back in to another Metro warehouse.
Following a three-day flat streak, the price of Chinese aluminum billet climbed by 0.7% to end at CNY 14,000 ($2,288) per metric ton on Thursday, November 20. The cash price of Chinese aluminum saw essentially no change for the fifth day in a row, remaining around CNY 13,660 ($2,232) per metric ton. The price of Chinese aluminum bar continues hovering around CNY 14,200 ($2,321) per metric ton for the fifth day in a row. The price of Chinese aluminum scrap remained essentially flat at CNY 12,950 ($2,116) per metric ton.
On the LME, the primary aluminum cash price inched up 0.5% to $2,025 per metric ton. On the LME, the 3-month price of aluminum rose 0.4% to $2,014 per metric ton. At INR 125.75 ($2.03), the Indian aluminum cash price finished the market day up 0.3% per kilogram.