"Beer Can Cost Rests on U.K. Aluminum Warehouse Verdict"

From Bloomberg:

It’s been a year since the U.S. Senate held a hearing on logjams at metal storage facilities and rising fees. Since then, costs have gone up and waiting times for delivery at some sites are even longer.

The London Metal Exchange, which oversees more than 700 warehouses, has been blocked from easing delays by Moscow-based United Co. Rusal, which as the world’s biggest aluminum producer stands to lose from shorter backlogs. The LME issued a new rule that storage facilities with the longest wait times had to release more metal than they took in. Rusal blocked the measure in a U.K. court, and the exchange is appealing in a case that starts in London today.

Wait times to obtain aluminum stretch to almost two years or longer in Detroit and Vlissingen, Netherlands, the two biggest sites for the LME-tracked metal. That’s up from about 15 months a year ago, when U.S. Senator Sherrod Brown, an Ohio Democrat, called on U.S. regulators to force changes in metals warehousing. Instead, higher prices benefited producers including Rusal and New York-based Alcoa Inc. and hurt end-users such as beverage makers.

“For the LME to address the problem of aluminum queues, it needs to implement its proposed new delivery-out rules,” said Nic Brown, head of commodity research at Natixis SA in London. “That’s not to say that the new rules would suddenly cure the problem. But you have to start somewhere.”

Aluminum Supply
The issue came to Brown’s attention after companies such as Denver-based brewer MillerCoors LLC complained that LME-authorized warehouse operators including Metro International Trade Services LLC, a unit of Goldman Sachs Group Inc., and Glencore Plc-owned Pacorini Metals were creating artificial limits on aluminum supply. U.S. regulators subpoenaed documents from warehousers including Metro last year. At least 36 lawsuits have been filed against the LME, Goldman Sachs and metal suppliers.

The price of aluminum for delivery in three months on the LME gained 11 percent in the past year to $1,998 a metric ton. Additional fees to obtain the metal in the U.S. and Europe, known as premiums, increased as much as 73 percent....MORE