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Superior files suit vs. Goldman, Metro, LME

Keywords: Tags  Superior Extrusion, Goldman Sachs, Metro International, London Metal Exchange, LME, LME warehouses, Midwest premium, aluminum prices lawsuit


CHICAGO — Superior Extrusion Inc. has filed a class-action lawsuit against Goldman Sachs Group Inc., Metro International Trade Services LLC, the London Metal Exchange and others, alleging that they conspired to inflate aluminum prices and premiums in violation of U.S. antitrust laws.

The Gwinn, Mich.-based aluminum extruder and other aluminum consumers suffered economic damages because the New York-based bank and the LME combined, conspired or agreed to restrain aluminum supplies in LME-listed warehouses in Detroit and inflated prices, including the Midwest premium, it said.

The class for the lawsuit, potentially tallying into the hundreds, includes anyone who purchased aluminum from Feb. 1, 2010, onward with pricing terms based on the Midwest premium, Superior Extrusion said.

The company wants a jury trial, unspecified damages, and reimbursement of attorney fees and other expenses, as well as a court finding that the defendants’ practices are unlawful.

"We believe this suit is without merit and plan to vigorously contest it," a Goldman Sachs spokesman told AMM Aug. 2, noting that aluminum prices have fallen nearly 40 percent from their peak in 2006.

The LME didn’t respond to requests for comment Aug. 2.

The defendants’ alleged collusion, which involved "shuttling aluminum back and forth from warehouse to warehouse" to keep stocks high and wait times for metal long, was profitable to both Goldman Sachs and the LME because it not only drove the Midwest premium and aluminum prices up but also increased income from storage fees, Superior Extrusion said. Goldman Sachs and the LME "generated hundreds of millions of dollars per year in storage revenues during their regime of artificially high storage rates and grossly inefficient and artificially long delays in loading out aluminum," the company said.

The impact of the alleged price manipulation was felt keenly in the Midwest, where aluminum inventories at LME-listed warehouses operated by Goldman Sachs’ Metro International subsidiary in the Detroit area shot up to record levels, while wait times to get metal out of those warehouses and the Midwest premium both reached new highs, Superior Extrusion said in a complaint filed in U.S. District Court in eastern Michigan Aug. 1.

Because of what Superior Extrusions characterized as "get paid to do less" and "diversion" agreements between Goldman Sachs, the LME and related groups, the Midwest premium spiked to 12 cents per pound or more after February 2013 from roughly 6.1 cents per pound in February 2010, the company said. Meanwhile, the amount of aluminum held in LME-listed warehouses in the Detroit area—with 29 of 37 operated by Metro International—jumped to approximately 1.46 million tons by the end of June 2013 from 460,000 tons in February 2009, opposite of what would be expected in an economic recovery, Superior Extrusion said.

"This large contraeconomic trend increase has restrained and trapped such a large portion of the available U.S. supplies of aluminum that it has been inflating aluminum prices since 2010," Superior Extrusion said, alleging that Goldman Sachs and the LME had essentially caused "water to run uphill."

When Goldman acquired Metro International in February 2010, wait times to get metal from Detroit warehouses were about six weeks, Superior Extrusion said, noting that this pushed out to 16 months by June 2013.

Exacerbating the situation, Goldman Sachs outbid aluminum consumers by offering firms incentives of up to $250 per ton to store metal in LME warehouses in Detroit instead of selling it elsewhere, Superior Extrusion said. That created a new "storage demand" for aluminum and prevented metal from being "efficiently sold for productive uses at competitive prices," the company said.

Rules aimed at shortening queues, proposed and already enacted (amm.com, July 1), are not sufficient to prevent "self-perpetuating feedback loops of greater and greater load-out backlogs and longer storage times," Superior Extrusion said.

Goldman Sachs recently pushed to make metal more readily available to consumers (amm.com, July 31) following increased political scrutiny on banks’ ownership of warehousing companies (amm.com, July 25).


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