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Goldman metal swap offer no help to Novelis: Madden

Keywords: Tags  Nick Madden, Novelis, Goldman Sachs, Gary Cohn, LME warehousing, Metro International Trade Services, Jethro Wookey

LONDON — Novelis Inc. and other aluminum consumers won’t benefit from Goldman Sachs Group Inc.’s offer to swap metal in warehouse queues with available material, as they have no metal in the queues, Novelis’ senior vice president and chief supply chain officer Nick Madden told AMM sister publication Metal Bulletin.

Goldman Sachs on Aug. 2 offered to swap any aluminum held by consumers in the delivery queue at Metro International Trade Services LLC warehouses for immediately available aluminum that it had sourced directly from producers.

Goldman president and chief operating officer Gary Cohn told CNBC that no one had accepted the offer, suggesting that there are no consumers waiting for metal in the delivery queue.

Madden confirmed that Atlanta-based Novelis was among the consumers that had received the Goldman offer, but said it was unlikely that any companies would take it up.

"We believe that other physical users of aluminum, like Novelis, are unlikely to be in the queue because no manufacturing business can tolerate a 19-month delay between buying metal and achieving delivery," Madden said.

"Novelis ruled out Detroit as a source of physical metal back in 2011, after sourcing aluminum from Detroit and waiting five months to receive the metal at our plant in Oswego, New York," he added.

"Since then, the wait time has ballooned. This raises the question of who are the ‘clients’ who own the metal in the queue in Detroit. It is our belief that this material belongs primarily to banks and trading companies which may be moving the metal to other storage locations."

While Madden backs Goldman Sachs’ position that consumers are not struggling to access metal, he maintains that the current warehousing system is damaging to the market.

A version of this article was first published in AMM sister publication Metal Bulletin

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