Complaint over aluminium logjams reaches EU watchdog

The European Union's competition watchdog has received a complaint against owners of metal warehouses for being so slow to release aluminium that it is forcing up prices for manufacturers, a consumer body said.

FACE and other consumer sources did not name the warehouse companies concerned in the complaint to the European Commission Directorate General for Competition. Any delays at warehouses mean buyers pay more in storage costs before they take delivery of the metal.

Glencore and Trafigura are among commodity trade houses that own warehouses in Europe registered by the London Metal Exchange (LME), the world's biggest metals marketplace.

Both Glencore and Trafigura, contacted by Reuters, declined to comment on the complaint.

Some metal market participants say trading companies are acting within their rights and that long queues are largely the result of the difficulty and expense of moving aluminium out of vast sheds in ports such as Vlissingen in the Netherlands.

The European Commission competition body and the LME declined to comment on the report of a complaint.

Consumer sources said the watchdog, which has the power to impose fines of up to 10 percent of company revenues, had not yet opened an investigation, although it has to follow up on complaints.

McHale of FACE declined to say when the complaint had been made or to name the consumers who had complained. One industry source said they included a major maker of aluminium goods.

The complaint follows one made by aluminium manufacturers to the commission's enterprise and industry department, which is also inquiring into the accusations. A source said the same companies had complained to competition authorities.

The controversy over warehousing is now a problem facing the LME's new owner, Hong Kong Exchanges and Clearing Ltd (HKEx) , whose $2.2 billion takeover of the metal exchange was approved by British regulators last week.

Warehouses registered by the LME at ports around the world are supposed to allow companies that need metal to take delivery of supplies, if necessary, against the exchange's futures contracts.

Normally the consumers would buy metal under long-term contracts, but the warehouse network allows the LME to perform its role as a market of last resort.

Manufacturers have long struggled to compete for aluminium supply with banks and trade houses that hold stockpiles of the metal for years on end as collateral for finance deals.

Their problems have come to a head as queues, sometimes lasting months, have developed across the LME warehouse network.

Industrial consumers say the queues result from warehouse owners concentrating metal into sheds at single locations and releasing it only at the minimum daily rate mandated by the LME.

The result, makers of aluminium goods say, is to keep even more metal away from industrial buyers, pushing up surcharges or "premiums" for the metal.

Metal buyers hope the exchange's new owners might tackle the problem forcefully, especially as the big banks and trade houses who own the warehouses have less influence on its policy after they sold their LME shares during the takeover.