high purity aluminium ingots
A string of aluminium warehouses in Detroit, most of them operated by Goldman Sachs, has stockpiled more than a million tonnes of the industrial metal aluminium, about a quarter of global reported inventories

Goldman Sachs Group and the London Metal Exchange have been sued in the US for restraining aluminium supplies and pushing up the metal's price.

Hong Kong Exchanges and Clearing Limited (HKEx), the owner of the LME, said that its subsidiary was named as a co-defendant in a class action lawsuit filed in the US District Court for the Eastern District of Michigan on 1 August.

Goldman Sachs was also named as a co-defendant in the lawsuit alleging "anti-competitive and monopolistic behaviour in the warehousing market in connection with aluminium prices", according to HKEx.

The lead plaintiff in the case is Superior Extrusion Inc, a provider of aluminium products and related services.

"Through an interconnected series of agreements in unreasonable restraint of trade, Goldman and LME restrained approximately 1.5 million tons of aluminium in LME Detroit warehousing," Superior Extrusion said in the lawsuit.

"LME is currently seeking legal advice in relation to the legal proceedings. LME management's initial assessment is that the suit is without merit and LME will contest it vigorously," HKEx said in a statement.

Allegations of Hoarding

Goldman and other warehouse owners were accused by customers and regulators of artificially inflating waiting times to lift metal prices as well as boost rents for warehouse owners.

LME aluminium buyers are required to pay a premium on the wholesale price of the metal to secure orders. This has risen by more than 150% since 2010 as stockpiles in warehouses rocketed to a record 5.5 million tonnes.

High aluminium prices have hit a number of industries, such as the drinks business, where consumers ultimately pay more for canned drinks whenever the cost of the metal creeps up.

US-based brewer MillerCoors said that the inflated price of the metal was costing consumers $3bn (£1.9bn, €2.26bn) a year.

Following the allegations, Goldman and the world's largest commodities trader, Glencore Xstrata, have been ordered by the US' Commodity Futures Trading Commission (CFTC) to preserve all internal documents and emails relating to the storage of aluminium ahead of a potential investigation.

Corrective Measures

Goldman had denied the claims and pledged to help end-users avoid year-long waits and high premiums by swapping aluminium held in its Metro International warehouses.

Goldman President Gary Cohn told CNBC television that the company has yet to find one customer to take it up on its offer despite scrutiny from market participants.

London Metal Exchange aluminium for three months delivery closed on Friday [2 August] at $1,809 per metric ton.

Warehouse owners and outgoing LME CEO Martin Abbott have also denied claims of long lines at the exchange, arguing there is no shortage of the metal.