A string of warehouses in Detroit, most of them operated by Goldman, has stockpiled more than a million tonnes of the industrial metal aluminum, about a quarter of global reported inventories. Simply storing all that metal generates tens of millions of dollars in rental revenues for Goldman every year.
There’s just one problem: only a trickle of the aluminum is leaving the depots, creating a supply pinch for manufacturers of everything from soft drink cans to aircraft.
The resulting spike in prices has sparked a clash between companies forced to pay more for their aluminum and wait months for it to be delivered, Goldman, which is keen to keep its cash machines humming and the London Metal Exchange (LME), the world’s benchmark industrial metals market, which critics accuse of lax oversight.
Analysts question why London’s metals market allows big financial players like Goldman to own the warehouses which store huge quantities of metal even as they trade the commodity.
Robin Bhar, a veteran metals analyst at Credit Agricole in London says the conflict of interest is so acute he wants U.S. and European anti-trust regulators to weigh in.
“I think it makes a mockery of the market. It’s a shame,” Bhar said. “This is an anti-competitive situation. It puts some companies at an advantage, and clearly the rest of the market at a disadvantage. It’s a real, genuine concern. And I think the regulators have to look at it…”
RTFA. Long, detailed, well-researched – and disgusting.
Simple solution which fixes this and all other attempts to corner the market on metals is to eliminate any inventory taxes on end users stockpiles. Let the big metal users keep as much as they can afford on hand. Eventually there will be enough companies worried about supply disruptions that they will keep a higher average number of days on hand. With low margins on products they will invest in security of their business and tend to keep more on hand. This will reduce price volatility and make our country less vulnerable to import disruptions.
Hmmm. Looks like I should be building some warehouses to deliver a better solution for these customers. I bet I could get some residential property cheap in New Orleans and have it rezoned. Construction would be dirt cheap in this economy.
If there is a mountain in the way go around it.
I’m curious abut what sort of person is still doing business with GS. I mean, don’t we all agree that they are the problem?
I think that Anonymous should publish the names and addresses of all GS employees and customers.
That way, after the economic collapse and NYC is in anarchy and the people there have nothing to eat but each other, at least they will have a list of nice plump GS people to pick from.
GF, Goldman would find a way to foil your plan.
Egon,
There is only one iota’s difference between the two.
So THAT’S what the old Chinese ladies with purple jackets and baseball caps are doing.