CHICAGO Metal consumers have not jumped at an offer from Goldman Sachs Group Inc. to swap warehoused aluminum for immediately available product in part because few of them, if any, were in the queue for aluminum when the offer was made, according to market sources.
Quick access to metal appears to have been available only to those already in the queue when the swap announcement was made July 31 (amm.com, July 31), according to the bank and market sources.
"No end-users have taken Goldman up on its offer," a spokesman for the New York-based bank told AMM. Asked whether the swap was available only to end-users in the queue on the day the announcement was made, the spokesman said, "Why dont you just assume it was for people who had metal in queue as of July 31."
Asked whether any end-users were in line at that time, the Goldman Sachs spokesman said the bank, per policy, was not allowed to know which companies might be waiting for metal from LME-registered warehouses in the Detroit area and referred questions to warehousing firm Metro International Trade Service LLC, Romulus, Mich.
Metro International, which is owned by Goldman, did not respond to requests for comment.
One end-user, Brampton, Ontario-based Matalco Inc., blasted Goldmans swap offer as "political posturing" and "disingenuous."
"Their offer applies only to consumer metal already in the appointment queue, not for fresh purchases of LME aluminum after the date of their offer. Thats disingenuous because, prior to the announcement of their offer, no consumer in North America had any metal in the queue because no consumer could afford paying them 18 months of rent and still end up with a favorable cost calculation," Robert Roscetti, director of corporate development at Matalco and Giampaolo Group of Cos., said in an Aug. 26 e-mail to AMM, referring to storage fees charged for warehoused metal. "When we went back to Goldman Sachs and pointed this out to them, they still refused to grant us speedier appointments for fresh LME purchases and would not explain the reason why."
Giampaolo Group, through its Triple M Metal LP trading business, in the past bought and shipped LME aluminum from Detroit warehouses to its Matalco cast houses on wait times of about 45 days, Roscetti said. Such purchases became difficult to justify in 2010, after Goldman Sachs purchased Metro International, as lead times lengthened and access to metal from LME warehouse in Detroit became more problematic, he said.
Long queues mean retrieving metal from LME-registered warehouses in Detroit is no longer a viable option for the company, Roscetti said. "We have to finance metal in inventory while we wait for a load-out date, and we are also obligated under LME rules to pay daily rent regardless of the duration it sits idle to us. Those calculations just dont work."
Goldman bought Metro in February 2010 (amm.com, July 30). Metro controls nearly half of the 160 London Metal Exchange-approved warehouses in the United States, including 78 percent of the 37 warehouses in Detroit, according to one recent lawsuit filed against Goldman and Metro that alleges, like similar cases, that the bank conspired to withhold metal from the market and drive up prices (amm.com, Aug. 19).
The issue also has garnered attention from the Senate and the Commodity Futures Trading Commission (amm.com, July 25).
Goldman has said it plans to defend itself against the lawsuits and has noted that aluminum prices have fallen 40 percent from their peak in 2006 (amm.com, Aug. 13).
Other end-users, such as Novelis Inc., Atlanta, also have said that the swap offer was of little use because aluminum consumers were unlikely to have metal in the queue, given 19-month delays between purchase and delivery. Material in Detroit warehouses belongs mostly to banks and trading companies, Novelis senior vice president and supply chain officer Nick Madden said (amm.com, Aug. 2).