NEW YORK The London Metal Exchange warehouse systems lengthy queues and high premiums paid for metal is costing aluminum buyers billions of dollars a year, according to one large consumer.
The system has cost MillerCoors LLC "tens of millions of dollars in excess premiums over the last several years, with no end in sight," said Tim Weiner, global risk manager of commodities and metals for the Chicago-based brewer. "My company and others estimate that last year alone the LME warehouse rules have imposed an additional $3 billion expense on companies that purchase aluminum."
In a statement before a July 23 hearing by a Senate Banking, Housing and Urban Affairs subcommittee, Weiner blamed U.S. bank holding companies for creating a bottleneck limiting the supply of aluminum.
The hearing to consider whether banks should control power plants, warehouses and oil refineries comes as U.S. consumers and politicians debate the commercial and physical commodity activities of U.S. banks.
Weiner said the aluminum his company purchases is being held in warehouses controlled and owned by U.S. bank holding companies "who are members of the LME and set the rules for their own warehouses."
According to Weiner, the brewer has taken its warehousing concerns to the LME and made a number of proposals to amend the rules, but its suggestionswhich included a daily load-out rate for each warehouse at each site, and a limit on rental charges after metal warrants are canceledwere dismissed.
U.K. and U.S. regulators "have indicated they are uncertain whether they have the regulatory authority necessary" to enforce changes on the LME warehousing system, Weiner said.