CHICAGO Goldman Sachs Group Inc., some of its subsidiaries and the London Metal Exchange have been slapped with another antitrust lawsuit alleging that they conspired to restrain aluminum supplies, inflate aluminum prices and manipulate Midwest premiums.
Metal stamper and aluminum extruder Talan Products Inc. contends in a class-action suit that the New York-based bank and subsidiaries GS Power Holdings LLC and warehousing company Metro International Trade Services LLC, as well as the LME and up to 50 "unnamed co-conspirators," engaged in the alleged scheme since least Feb. 1, 2010, according to documents filed in U.S. District Court in Michigan.
"We believe this suit, like the other substantively identical ones, is without merit and we intend to vigorously contest it. We also note that aluminum prices are down 40 percent from their peak in 2006," Goldman Sachs said.
An LME spokeswoman declined to comment.
Goldman Sachs and the LME are facing at least six other antitrust lawsuits filed by aluminum consumers (amm.com, Aug. 19).
Talan alleged in its lawsuit that the parties monopolized or attempted to monopolize domestic aluminum supplies while engaging in a multi-year conspiracy to restrain aluminum flows out of LME warehouses in the Detroit area. The Cleveland-based company accused Goldman, the LME and others of attempting to "fix, raise, maintain and stabilize prices for aluminum, including aluminum premiums such as the Midwest premium."
Talan chief executive officer Steve Peplin told AMM Sept. 17 that his company buys P1020 ingots from a broker to make parts largely for the building and construction sector.
Whatever the LME might do, Midwest premiums for years generally hovered around 4 cents per pound, accounting for factors such as insurance costs, storage fees and contangos, Peplin said. "We just accepted (the Midwest premium). It only really got untenable when it went to 10 to 12 cents. Three years of 6 to 8 cents a pound extra, thats a lot of money."
The surge in premiums happened at about the same time banks got into the business of warehousing metal, Peplin said. "Once they bought those warehouses, the metal became unavailable and the premiums doubled. Thats what I believe is the heart of the case: Premiums are artificially high due to anti-competitive behavior ... by more or less cornering the market."
Alyson Oliver, an attorney with Oliver Law Group PC, who filed the complaint on behalf of Talan, said the problem is systemic across metal commodities traded on the LME. "I dont think its limited to aluminum. ... This is just the tip of the iceberg," she told AMM.