NEW YORK, July 31 (Reuters) - Goldman Sachs on
Wednesday responded to mounting political and regulatory
scrutiny of its Metro International metals business, offering
customers immediate access to aluminum stored in its warehouses.
In a statement outlining the bank's proposal to reduce lines
at all London Metal Exchange warehouses, the bank said it would
make aluminum immediately available. Customers and U.S.
lawmakers have accused Goldman Sachs and other warehouse owners
of artificially inflating lines to boost rents for warehouse
owners and causing metal prices to rise.
"Goldman Sachs is contacting end users to offer to swap any
aluminum currently in the queue for immediately available
aluminum so that they have access to the metal they need to make
or package their products," the bank said.
Regulators including the U.S. Department of Justice and the
U.S. Commodity Futures Trading Commission have begun preliminary
investigations into Wall Street banks and other large commodity
traders which own metal warehouses, Reuters has reported.
Goldman Sachs bought Metro International Trade Services, an
international network of metals warehouses, for around $550
million in 2010, the first in a wave of such purchases by big
JPMorgan Chase & Co., and trading companies Glencore
and Trafigura are among the major players who also have
The U.S. Senate banking committee held its first hearing on
the issue last week, when aluminum users represented by brewer
MillerCoors LLC said high physical prices have cost the
consumers an extra $3 billion a year in expenses.
Others large aluminum consumers, including Coca-Cola Co
and sheet supplier Novelis Inc have also
The warehouses and the London Metal Exchange, which oversees
the storage outlets in its network, say the big stockpiles and
high physical prices are the result of low interest rates and a
market structure known as contango, which makes it profitable to
sell metal forward and store it for months or years at a time.
It is also the byproduct of LME rules, which require
warehousing companies to deliver a minimum amount of tonnages of
metal each day. According to current rules, facilities with
900,000 tonnes or more metal have to load out 3,500 tonnes of
Under fire from irate users, the LME has proposed an
overhaul of its warehousing policy that would come into effect
Goldman said it supported more transparency, including
disclosure of which companies hold the aluminum and other metals
in the LME system.
The bank proposed that end users like car manufacturers
should be prioritized in the lines before other users like
traders and funds.
Goldman looked at a possible sale of its Metro International
warehouse business this year. The bank also faces pressure from
the Federal Reserve over its ownership of physical commodity
On Wednesday, a source familiar with the business said the
bank plans to keep the Metro business, and considers it a
merchant banking investment that it would not have to sell until