Friday, August 30, 2019

"U.S. appeals court revives aluminum antitrust cases vs Goldman, JPMorgan, Glencore" (GS; JPM; GLEN.L)

Return with us now to those halcyon days early in the currentt decade!*
From Reuters, Aug. 27:
A federal appeals court on Tuesday revived lawsuits by aluminum purchasers that accused Goldman Sachs, JPMorgan Chase, mining company Glencore and other companies of conspiring to drive up prices for the metal by reducing supply.

In a 3-0 decision, the 2nd U.S. Circuit Court of Appeals in Manhattan said a federal judge erred in dismissing antitrust claims by “direct” purchasers of aluminum such as Novelis, and by other purchasers including Eastman Kodak, Fujifilm and Reynolds Consumer Products.
Purchasers accused banks and commodity trading, mining and metals warehousing companies of conspiring to hoard aluminum inventory earlier this decade, after prices had declined because industrial activity fell during the global financial crisis.

The purchasers said the alleged conspiracy led to delays in processing orders and higher storage costs, ultimately inflating the cost to produce cabinets, flashlights, soft drink cans, strollers and other goods containing aluminum.

Lawyers for the defendants did not immediately respond to requests for comment.
Writing for the appeals court, Circuit Judge Pierre Leval said the purchasers could sue because they claimed to suffer harm in a market that the defendants allegedly restrained, the market to buy and sell primary aluminum.

He distinguished them from commercial end users and consumer end users, whose own antitrust claims were rejected by the appeals court in an August 2016 decision because their claimed injuries were too far removed from the alleged misconduct.

Leval faulted U.S. District Judge Katherine Forrest, who has since returned to private practice, for relying on that decision to conclude that any manipulation would have occurred in the warehousing market, not the primary aluminum market...MORE
*As noted in the outro from 2013's "UPDATED: "How Goldman Made $5 Billion By Manipulating Aluminum Inventories (and Copper is Up Next)"":
Reuters and especially the Financial Times' Alphaville blog have been on top of this almost from the time the big banks started buying the warehouse companies back in 2010. Here's some FTAV:
Is ‘cash for commodity’ the biggest trade in town?  
Just like a giant secured loan to commodity producers 
The UK is concerned about banks that warehouse commodities
Please wait 10 months for your aluminium. Thank you
LME warehouse recommends upping load-out rates
Welcome to ‘synthetic warehousing’ 
Let’s count the copper with dust on it
Goldman on metal pawning
An upcoming dehoarding effect in metals?
Deripaska on the collateralisation of aluminium
Collateral crunch, commodity financing edition

And many, many more.
We also have quite a few posts, here's the Google site search: warehouse
The first three of 251 hits:
Want to Get Copper Out of the Warehouse? Pay a Premium (there's $3.75 mil per day being made)
End Users Close to Telling LME, Warehouses: "Go To Hell"
Playing the LME Copper Warehousing Game: New Loadout Rules May Have Increased Financing Deals

And for one of the cases mentioned in the headline story: 
September 3, 2014
Bloomberg's Matt Levine Talks Goldman Sachs and Aluminum 
Dizzynomics alerted us to to the dismissal on Aug. 30. More interesting was her piece immediately preceding the aluminium  post on "Muscle Economics"
Here's more detail, from Bloomberg:
The Goldman Sachs Aluminum Conspiracy Lawsuit Is Over...