Goldman, JP Morgan Have Now Become A Commodity Cartel As They Slowly Recreate De Beers' Diamond Monopoly

Tyler Durden's picture

About a month ago we reported on an inquiry launched into JPM's "anti-competitive" and "monopolistic" practices on the LME which have resulted in artificially high prices for a series of commodities which had been hoarded by the Too Big To Fail bank. Today, the WSJ continues this investigation into a practice that is not insular to JPM but also includes Goldman Sachs and "other owners of large metals warehouses" which can simplistically be characterized as a De Beers-like attempt to artificially keep prices high for commodities such as aluminum, courtesy of warehousing massive excess supply, artificially low market distribution of the final product, while collecting exorbitant rents in the process. Specifically, "Goldman, through its Metro International Trade Services unit, owns the biggest warehouse complex in the LME system, a series of 19 buildings in Detroit that house about a quarter of the aluminum stored in LME facilities. Coca-Cola and other consumers say that Metro in particular is allowing the minimum amount of aluminum allowed by the LME—1,500 metric tons a day—to leave its facilities, and that Metro could remove much more, erasing supply bottlenecks and lowering premiums for physical delivery in the process. Coca-Cola, which has complained to the LME, says it can take months to get the metal the company needs, even though warehouses are allowing aluminum to come in much more quickly. Warehouses, meantime, collect rent and other fees." It is not only Goldman's Metro operations, but includes JP Morgan's Henry Bath division, and naturally commodities behemoth Glencore, all of which are taking advantage of the LME's guidelines and rules which make the imposition of a pseudo-monopoly an easy task. The primary driver of this anti-competitive behavior is the fact that GS, JPM and Glencore now control virtually the entire inventory bottlenecking pathways: "In recent years, major investment banks like Goldman and J.P. Morgan and commodities houses like Glencore have been snapping up warehouses around the world, turning the industry from a disperse grouping of independent operators into another arm of Wall Street. The LME has licensed about 600 warehouses around the world. The transformation has raised questions about whether the investment banks, which also have big commodity-trading arms, are able to use their position as owners of warehouses to manipulate prices to their advantage."And since the outcome of this anti-competitive delayed tolling collusion ends up having quite an inflationary impact on end prices, the respective administrations are more than happy to turn a blind eye to this market dominant behavior which buffers the impact of deflation on input costs. We may have seen the end of the OPEC cartel. Alas, it has been replaced with a far more vicious one - this one having Goldman Sachs and JP Morgan as its two key members.

WSJ explains further:

The warehousing issue alarmed one trader enough to seek government intervention. Anthony Lipmann, managing director of metals trader Lipmann Walton & Co. Ltd., gave evidence to the U.K. House of Commons Select Committee in May 2011, raising concern about large banks and trading houses owning facilities that store other people's metal.

The U.K.'s Office of Fair Trading dismissed concerns that ownership of warehouses gives certain market players an unfair advantage, saying on Tuesday that there were no "obvious competition issues that would merit further investigation at this stage."

Goldman's Detroit warehouse holds about 1.15 million tons out of a total 4.62 million tons in LME-approved warehouses.

Since Goldman bought Metro early last year, the wait time for aluminum delivery in Detroit has increased to about seven months.

Metro charges its customers 42 cents a day for storing one metric ton of aluminum in Detroit, which is about the industry average. At 900,000 tons in the warehouses, Goldman is earning $378,000 a day on rental costs, or about $79 million in seven months.

"Warehouses are making a lot more money," said Jorge Vazquez, managing director of aluminum at Harbor Commodity Research. Goldman is "really the winner clearly, because if you want to take metal away from the location, you have to wait up to 10 months to get your metal out, and in the meantime you're paying rent."

While the obvious purpose of "warehousing" is nothing short of artificially bottlenecking primary supply, these same warehouses have no problem with acquiring all the product created by primary producers in real time, and not releasing it into general circulation: once again, a tactic used by De Beers for decades to keep the price of diamonds artificially high. But unlike De Beers, Goldman also gets to charge rental fees once demand delivery instructions are sent out. The rent ends up being substantial due to the firm's unwillingness to release handily available product to the market in due course:

Metro, meantime, is taking in metal. Metro also offers cash incentives to producers like Rio Tinto Alcan to store their metal in Metro's sheds for contracted periods, sometimes as much as $150 a ton, according to traders.

Once the metal is in the warehouse, the producers sell ownership to this metal on the open market. The new owner can't collect his metal for seven months because of the bottleneck. For that period, the new owner is stuck paying rent to Metro.

"The system is set up like a funnel, so you can dump large amounts of metal in the front end and only get a little out at the back end," said David Wilson, director of metals research at Société Générale SA. "It enables a situation where the rules of the warehousing system are taken advantage of."

Another beneficiary of this monopoly behavior of course are the actual metal producers, which benefit from this illegal and conflicted "middleman" intervention:

Aside from warehouses, producers of the metal are benefiting, because they are able to charge more for their metal. Klaus Kleinfeld, chief executive of Alcoa Inc., said in an interview that supply-and-demand factors are leading prices higher.

Yet it is not even Goldman or JPM's fault: after all they are merely following the guidelines set up by the LME:

"You can't blame the warehouses," Mr. Kleinfeld said.

U.S. aluminum sheet maker Novelis sent a letter to the LME in May "expressing concerns" about the warehousing situation, a company spokesman said.

The complaints led the LME to commission an independent study into the issue last July. That study recommended a sliding scale be adopted, rather than the fixed minimum of 1,500 tons a day. That would result in larger warehouse complexes being required to release more metal.

It effectively doubles the minimum amount required to be relinquished by Metro each day. The ruling would go into effect in April. The LME board on Thursday, however, failed to reach a consensus on the recommendations.

While warehousing used to be a last resort market at inception, it has now become, courtesy of the economies of scale of the middlemen, the "go-to" market, which makes any normal market clearing impossible.

Because should true market clearing be allowed, the prices for everything from aluminum to copper would plunge immediately:

The situation is made more aggravating for metal consumers because supply has far outweighed demand for most of the last decade, and there is more than 4.5 million metric tons of surplus metal stored in LME's warehouse system.

Alas as pointed out previously, with the exchanges ultimately merely conforming to the bidding of their host ponzi scheme governments, which will happily allow even further consolidation of warehousing facilities by the trio in order to artificially boost inflation ever higher, the final product is a vicious loop in which everyone benefits...Everyone but the end consumer of course, who is faced with an anti-competitive system controlled by a handful of Fed-funded players.

And with China unlikely to open up sales of its own warehouses (especially since Chinese vendors are now well-known to use physical copper in storage to write letters of credit against for speculative purposes) to the market, the system will persevere until such time as global inflationary powers are finally destroyed and there is a scramble to dump inventories. Like what happened in the fall of 2008. At that point just as the status quo drives prices higher, so the unwind will result in a massive undershoot of prices from fair values. Which in turn will allow those insatiable importers of commoditized product such as China to feel like your typical mortgage-free living American at a K-mart blue light special. But of course we don't have to worry about that, because the central planners will never allow the system to implode like it did in 2008. After all that would defeat the whole purpose of central planning...

In the meantime, good luck to anyone who wishes to break the cartel's monopoly in the aluminum, copper or any other commodity.

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Yen Cross's picture

 Z/H you are getting hacked big time. My IT and ISP people are sending me red alerts!

whatsinaname's picture

Speaking of getting hacked, Vancouver took a big hacking from its own hockey fans (changed my perspective of Canadian folks) OR is it pent up frustrations of the sheeple coming to the fore ?

greased up deaf guy's picture

same thing happened in vancouver in '94 when the rangers beat the can(adian schm)ucks in the finals. only difference here is we riot when we win (re the lakers).

Ahmeexnal's picture

And on the topic of Canada and the collapse of civilization....Canada Post has ceased operations:


The accelerating decline in mail volumes and revenue combined with the inability to deliver mail on a timely and safe basis has left Canada Post with no choice but to make this decision.


First it's the postal service, then other delivery services. When food is no longer delivered to your local Walmart, will you start to panic then?

Michael's picture

Here's the problem.

High Heels & Hand Bags.

How's that supposed to impress that man your trying to pick up with the high heels and hand bag made by a man who lives on another continuant?

Does she have a thing for those men living on other continents?

Why have we not heard from womens groups on how they feel about how the economy is being managed? 

Why don't they want the men living on the same continent with them making High Heels and Hand Bags, made by the men they are trying to attract with those things?

It would give them something to do here and there making high heels and hand bags, thus getting the men out of their hair for a while.

Can someone help me out with this? I'm confused.


Monedas's picture

Help ? 1. You need to track down one of those bitches with imported accessories and get yourself a piece of that special something that lies behind the handbad and above the high heels ! 2. Push away from that crack pipe ! "Just say no !"....N. Reagan. Monedas 2011  

New World Chaos's picture

So that were the LAN outage and the page virus scan screen came from.  Tighten your tinfoil hats, folks.  Hide your bitcoins and don't click any buttons except Ctl-Alt-Del.

macholatte's picture


I think it's wrong that only one company makes the game Monopoly.
Steven Wright

flacon's picture

Did you see they now have "Electronic Monopoly" using "bank-cards"? Who the hell are they kidding?!


"Play now with millions on your card!" -> yeah... it used to be that $1 was worth something and a $100 was worth a lot. Now they need "millions" to convince people that paper (oops, sorry, 'electronic') is worth anything. Even Monopoly has succumbed to inflation!


"Cards, not cash!" -> LOL!!!! They are SCREAMING at us: MORE DEBT IS GOOD!!!!


flacon's picture

The only way is for you, me and our friends to DRAIN THE WAREHOUSES. Keep on stacking! SLV only has 300 million ounces. If I buy a thousand ounces, it will only take three stadium's full of people like myself in order to drain it. 


But.... on second thoughts, SLV isn't even audited... so.... in the land of the blind the one-eyed is king... 


lizzy36's picture

Who needs prop desks?

The payout on the storage facilities is around 9 months.

Plus they are owners of physical products (metals, crude and nattie).

In a world where physical matters, prop is so 2005.

RockyRacoon's picture

Add some mining, refining, truck/rail facilities, and some wholesalers and you got a business!   Are we sure they don't own any of those things as well?

suckapump's picture

What really chaps my ass is that these fools shouldn't own anything. Their assets should have been sold at auction sometime in 2009.

Maybe we (the people) should "condemn" the warehouses and confiscate the contents. It seems only fair.

Yen Cross's picture

 Don't make me pump ya up "SUCKA".

Sudden Debt's picture

I wouldn't be surprised. A few TRILLION dollars in TAXMONEY still buys a lot of things these days.

And as a thank you note for the taxmoney, they BRING YOU INFLATION TO TAKE THE REST OF YOUR MONEY!!




I don't hear any heels clicking gentlemen! I SAID ALL HEIL TO THE NEW FUHRER!!


adeptus's picture

Just what you suggesting Tyler, that they break their 400 day "no losses" trading streak?

AgShaman's picture

When JPM took over the Henry Bath properties via their RBS Siempra purchase...was around the same time that Blythe issued the "Don't Worry....It's No Big Deal/Not Panic Time" well as showing some employees the door and claiming they left under their own volition. Truly a strange time for the precious metals....soon after is when the small speculators concocted their scheme to extort a premium from the Bullion Banks vs. taking actual delivery of the metals on their Comex trades. Didn't seem to last that long....the ETF paper back-up threw up a "cock block"

sterman7's picture

Could the CME CTFC FED and bullion banks be a bigger bunch of shysters?  The sad reality is most folks have no idea that they should be outraged by this kind of stuff.

Conax's picture

"It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning."
- - -Henry Ford

Revolution? How about just taking delivery, stick it to them good.

That can't be too much to ask.

TheGoodDoctor's picture

I wonder if people in Detroit read the WSJ?

slewie the pi-rat's picture

in case of fire, break glass

in case of hostilities, call a LME bankster for metal, ok? 

Yen Cross's picture

 A man of reason! Someone hit my synaptics.   Truth.



PulauHantu29's picture

"Why Steal less, when you can Steal more?"

Wall Street's Mantra

gwar5's picture

Next it will be food staples and antibiotics.

I can see where this is going. With enough essentials stuff they can use them as collateral for letters of credit in a cruel, cruel world.

TruthInSunshine's picture

Don't forget about drinking water!

TruthInSunshine's picture

So legalities (illegalities) aside, who is going to try and stop this clearly anti-competitive practice and clear collusion, which massively inflates end user and consumer prices?


It's a big tell that Coca-Cola is brushed off as a piss ant when it tries to stand up to Goldman & JP Morgan, no?

It should tell anyone in modern day Amerika who owns and runs the joint, no?

Raymond Reason's picture

The Fed has got to go.  Then the banks will fail and this kind of BS will not be possible. 

Thisson's picture

If there was any truth to this matter a legal complaint would already have been filed, since antitrust cases yield triple damages when successful.

Coca-Cola certainly has the resources to bring such a case.

Troy Ounce's picture


This feels like a nightmare.


Pinch myself. Can't be true. We can't go on like this.

TruthInSunshine's picture


Metro International Trade Services LLC Metro International Trade Services LLC           Headquarters:              6850 Middlebelt Rd.,              Romulus, MI 48174 USA              t: +1 734 721 3334      

   f: +1 734 721 3963


Metro is a leading global warehouse operator, specializing in the storage of non-ferrous metals for the London Metal Exchange.

Products stored:
Aluminum, Aluminum Alloy, Copper, Lead, Nickel, Plastic, Steel, Tin, Zinc, Plastic Resin & Steel Billet.

Yen Cross's picture

 Blood Diamonds?

Coldfire's picture

Obviously, if you run money and credit, you can buy anything, including the so-called regulators, judges and politicians, ie., the Potemkin village idiots.

traderjoe's picture

Print money for free, loan it out at interest - collateralized by productive assets. Create cycles of inflation and deflation. Bingo - you own everything.

ToNYC's picture


In Bingo, you don't get to call out your own numbers. Banko is way better, until the people lose the illusion that they are owners rather than dispossessed rentiers who have not the capacity to buy any part of the everything they don't already have.

wisefool's picture

You forgot the Tax Code. The thing that makes sure the mob thinks the game is a good idea. Or atleast keeps them so confused or scared that they conform.

Hello Sheep! You deserve to be in a $600k house. We are going to give you a mortgage interest deduction, and force the banks to lower lending standards through the community re-investment act, or we'll cream them on thier taxes.

Already have a house? Builder Buy another one! Farmland is for dumb farmers. Open spaces are for hippes who like to ride bikes and such.  2000 sq ft houses are for old people who can't clean to much bigger of a house. Apartments are for kids. Grow up!

Yen Cross's picture

 Nice try, comma   payback is MUCH WORSE!

TruthInSunshine's picture

I'm fairly certain they have 19 warehouses in Detroit since there was a ton of very inexpensive and perfectly good (and massive) warehouse units to be had there, given the shrinkage of the automotive sector.

It also may have something to do with the relationship between the Sherman-Antitrust Act and federal preemption of state laws that may conflict with it (Michigan law on such matters would have to parsed - see Rice v. Norman Williams Co., 458 U.S. 654 [1982]).


RICE V. NORMAN WILLIAMS CO., 458 U. S. 654 :: Volume 458 :: 1982
TruthInSunshine's picture

Not on all fours legally speaking, but this is a case that touches on Sherman AT Act vs. Clayton Act (does not involve warehousing scheme to limit supply, as this situation ostensibly does):

Southwire Co. v. J.P. Morgan Chase & Co.


Yen Cross's picture

 Tools welcome.  Blow out my (ISP) any time (dot)

baby_BLYTHE's picture

Buy Gold and hold.

Don't bother with equities.

The dollar is the Titanic headed for collision course

baby_BLYTHE's picture

80% of my meager wealth is stored in PMs.

Gold & Silver is written in the Constitution. Good enough for me.

Laddie's picture

Ben Bernanke, Andrew Fastow, Maurice Greenberg, Alan Greenspan, Michael Milken, Marc Rich, Myron Scholes, George Soros, the list goes on and on...

Now the Banksters, well they got several TRILLION Taxpayer $$ and they've done well, speculating in Tel Aviv real estate for instance, now this little scheme that Tyler is sharing with the readers of ZH.

The governments of the world aren't reigning in these Rothschild bankers. Just the opposite is happening. We are watching the outright takeover of all world governments by the Zionist bankers and the consolidation of their power.

Yen Cross's picture

 The Milken  " Wants ta Tute"  Am I pissed off?