WASHINGTON — Federal regulators have launched an investigation into whether some Wall Street banks artificially inflated the cost of aluminum at the expense of end users and consumers, according to people familiar with the matter.
Commodity Futures Trading Commission enforcement officials last week sent subpoenas to firms responsible for storing and delivering aluminum, including Goldman Sachs Group Inc., seeking documents related to their commodities operations as far back as January 2010, the people said.
The investigation stems from complaints by end users, such as beer and soda companies, that firms responsible for warehousing the metal have allegedly inflated prices by holding on to aluminum for longer than necessary. The added time boosts storage costs that are priced into aluminum upon delivery. The storage practices in focus are tied to warehouses approved by the London Metal Exchange, some of which are based in the U.S.
The CFTC sent the subpoenas to Goldman and its Metro International Trade Services unit, which stores metals such as aluminum, copper and tin for the LME.
The agency is also looking into the hedging practices of aluminum end users and whether any hits on their aluminum purchases could be traced to them, the people said.
The subpoenas come amid heightened scrutiny of Wall Street’s involvement in commodity and energy markets. The Senate Permanent Subcommittee on Investigations has sought information from several banks about commodity storage practices.
