Back to top

Analyst Blog

The U.S. banking major, The Goldman Sachs Group, Inc. (GS - Analyst Report) along with The London Metal Exchange (LME) – a subsidiary of Hong Kong Exchanges and Clearing Limited – was recently sued in a class-action lawsuit. The suit was filed in the U.S. District Court for the Eastern District of Michigan, over aluminum warehousing. The main plaintiff in the lawsuit was a Mich.-based aluminum extrusion company, Superior Extrusion Inc.

The plaintiffs accused Goldman of anti-competitive and monopolistic actions in the warehousing business. The suit also imputed Goldman and LME of hoarding approximately 1.5 million tons of aluminum at warehouses in Detroit in order to take advantage of inflating prices.

Additionally, consumers and the U.S. regulators have accused Goldman and other warehouse owners of artificially increasing waiting times to facilitate lease payment and raise metal prices.  

The lawsuit comes in the wake of criticism of banks that own commodity assets and trade raw materials. Notably, in July, the Federal Reserve stated that it was reviewing its 2003 decision of allowing banks to pursue trading in the physical commodity market.

Further, following complaints of banks and traders manipulating supplies and prices, the Commodities Futures and Trading Commission has initiated an inquiry on the banks’ role in the metals warehousing operation. This had resulted in JPMorgan Chase & Co. (JPM - Analyst Report) announcing its plans to exit the physical commodity business, including stakes of commodities assets and physical trading operations.

Since Mar 2013, Goldman has also been trying to sell its warehousing business – Metro International Trade Services LLC, while Morgan Stanley (MS - Analyst Report) has been trying to find a buyer for its oil pipeline and terminals business – TransMontaigne – for more than a year now.

Notably, rising aluminum prices have hit numerous industries, including the beverage sector. Customers have to pay more for canned drinks each time the cost of the metal creeps up. Molson Coors Brewing Company (TAP - Analyst Report) said that the inflated price of the metal was costing consumers around $3 billion annually.

Therefore, lawmakers are concerned about the risks from banks' ownership of warehouses and plants. They believe that banks' holdings of these assets tend to concentrate market power and increase bank profits, thereby affecting consumers.

Goldman currently carries a Zacks Rank #2 (Buy).

Please login to or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research


Are you a new Zacks Member or a visitor to

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
GTT COMMUNI… GTT 11.65 +4.11%
ALLERGAN IN… AGN 161.82 +3.99%
CLAYTON WIL… CWEI 117.06 +3.73%
GREENBRIER… GBX 69.63 +2.37%
RF MICRO DE… RFMD 12.02 +2.04%