Commodity Futures Trading Commission (CFTC) should look into
allegations that aluminum warehouse owners in the United States
may be using London Metal Exchange rules to manipulate aluminum
prices in potential violation of commodity exchange rules, the
head of the Senate Agriculture Committee said July 30.
governed by LME regulations may be "slow-walking" aluminum
deliveries to bolster profits from storage fees, according to
Sen. Debbie Stabenow (D., Mich.).
"Buyers of aluminum
allege that the current market price of aluminum is being
skewed by those who own and profit from the storage of metal at
warehouses," Stabenow said in a letter to CFTC chairman Gary
Consumers claim that
LME warehouse rules "have been set by and for the benefit of
those who stand to profit from the rules, even if it works
against consumers and a fair market price," Stabenow said,
noting that the impact on prices may be hitting consumer goods
such as beverage cans and cars.
both physical aluminum supplies in warehouses as well as
derivatives linked to those supplies implies "a potential for
price manipulation," she said.
Stabenow asked whether
the CFTC had jurisdiction over U.S.-based warehouses or the LME
and, if the agency does not, what measures it might recommend
that Congress adopt. "We need to determine if there are any
gaps in oversight and whether there is sufficient authority to
deal with those gaps," she said.
comments came after Sen. Sherrod Brown (D., Ohio), chairman of
the Senate Banking Committees subcommittee on Financial
Institutions and Consumer Protection, said he wanted to see the
U.S. Federal Reserve issue "clear guidance" on bank holding
companies and non-bank activities, such as involvement in
physical commodities operations, which he said saddles both
banks and taxpayers with too much risk (
amm.com, July 25).
A subcommittee hearing
saw big banks come under fire, with Goldman Sachs Group
Inc.s ownership of warehousing company Metro
International Trade Services LLC facing scrutiny due to long
waits for metal and potential conflicts of interest, given
Goldmans role in both aluminum storage and trading.
Goldman has denied the allegations (
amm.com, July 24).
The LME said it has
worked since 2010 to shorten warehouse queues, and argued that
there was no aluminum shortage in the market. It noted that it
is legally prevented from capping rents or preventing trading
companies from owning warehouses (
amm.com, July 23).
Goldman bought Metro
in February 2010 (
amm.com, Feb. 19, 2010), the same month that
JPMorgan Chase & Co. acquired the Henry Bath warehousing