Millions of tons of metal stored in "shadow warehouses"

The WSJ shines a light onto "shadow warehouses," a hidden system of facilities that store tens of millions of tons of aluminum, copper, nickel and zinc across the globe for banks, hedge funds and commodity merchants.

The warehouses operate outside the London Metal Exchange's system, are unregulated, and don't provide details of their holdings. As a result, it's unclear how much metal is held in the shadow system. This lack of visibility could cause major price swings.

The WSJ article follows allegations that warehousing companies have artificially boosted the price of metals, particularly aluminum.

Companies that operate metals warehouses include Goldman Sachs (GS), Glencore Xstrata (GLCNF) and JPMorgan (JPM), although the latter is looking to sell its commodities unit.

Relevant tickers include VALE, AA, AWC, KALU, MNSF, CENX, NOR, BHP, RIO, ACH.


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Comments (15)
  • DeepValueLover
    , contributor
    Comments (11332) | Send Message
    What about gold and silver?
    27 Dec 2013, 04:57 AM Reply Like
  • butteredbread
    , contributor
    Comments (29) | Send Message
    They didn't do a very good job boosting the price of gold this year.
    27 Dec 2013, 06:31 AM Reply Like
  • Clayton Rulli
    , contributor
    Comments (3424) | Send Message
    you probably wouldn't need alot of space like a warehouse for gold or silver, right?
    27 Dec 2013, 07:41 AM Reply Like
  • Robin Hewitt
    , contributor
    Comments (5632) | Send Message
    You don't just throw gold and silver into a warehouse. You need a high security vault and armed guards
    27 Dec 2013, 10:04 AM Reply Like
  • Gumby
    , contributor
    Comments (3658) | Send Message
    Right but you still need an army to guard it...
    27 Dec 2013, 02:08 PM Reply Like
  • Jeff CA
    , contributor
    Comments (93) | Send Message
    Gold and silver are not traded on the LME
    28 Dec 2013, 12:27 PM Reply Like
  • nsalat
    , contributor
    Comments (153) | Send Message
    A warehouse full of shadow inventory would only serve to temporarily inflate, as other known inventory fills demand, then you are left with too much metal and price will go down.... no?
    2 Jan 2014, 11:14 PM Reply Like
  • GoldMinersLuck
    , contributor
    Comment (1) | Send Message
    These are all non-precious metals being stored here. JP Morgan would be trying to raise the price of Gold and Silver if they where holders. Since they are in need of large quantities they are trying to lower the price while they accumulate. Its fairly easy to see once you learn how to open your eyes to reality. After you make a few "discoveries" of your own as a sufficiently autonomous individual then all the liars are just humorous.


    Don't take my advice, or anyone else's!!!!! Do your own due diligence and you will see where this silly social experiment is going!!!! GL everyone, this is going to be one hell of a ride.
    27 Dec 2013, 12:04 PM Reply Like
  • XTigerX
    , contributor
    Comments (315) | Send Message
    WSJ writes this article every year. There's a big steel company near my neighborhood. They store LOTS of product on site too. Good luck guessing what it means for pricing. One day it could all move to market and dent prices or it just might sit there for several years doing exactly nothing.
    27 Dec 2013, 01:13 PM Reply Like
  • seekingpaul
    , contributor
    Comments (17) | Send Message
    I understand Rio Tinto had a large quantity of copper/&, Mongolio in the form of ore, prior to the Gov. allowing it to be shipped from (TRQ) turquoise hill..I don't see anything alarming or like a
    '"Shadow Warehouse", just a fact, and stored as raw ore, but the minerals are
    27 Dec 2013, 04:25 PM Reply Like
  • manfredthree
    , contributor
    Comments (3157) | Send Message
    And exactly what is their (WSJ) point in the case of aluminum ? The continuing implication of this noise appears to be that aluminum ingot should be even cheaper than the cost of production, so that perhaps a fraction of a penny comes out of a pop can for a year or so ? It is a really weird drum beat in an environment where everyone knows that reducing capacity significantly today means much sharper and uncontrollable inflation once demand catches up to residual supply. Despite the continuing anguished complaints of the offended consumer goods packagers, they have to know that the current price of ingot is totally irrelevant to their profitability and competitive positions. Use of the word 'shadow' is just really stupid, an excuse for hating , denying, or simply not understanding the fundamental laws of supply and demand And we then wonder how those WSJ authors would attempt to describe the system whereby banks and individuals trade, store and transfer 'money' and currencies. Maybe they just all need Economics 101.
    27 Dec 2013, 10:25 PM Reply Like
  • Robin Hewitt
    , contributor
    Comments (5632) | Send Message
    The point is that some big players appear to be gearing up to manipulate the commodities market. Presumably for profit.
    28 Dec 2013, 01:28 AM Reply Like
  • Jeff CA
    , contributor
    Comments (93) | Send Message
    Five companies =75% trade on the LME They also own the "Shadow Warehouses".
    28 Dec 2013, 12:35 PM Reply Like
  • CLP7713
    , contributor
    Comment (1) | Send Message
    I got an email from a friend who was referencing the article below as to why this is such an important article. Somebody, please give me any reason to believe it or otherwise.


    WSJ Reveals Where All the Stolen Money From the System Is Sitting
    Posted on December 27, 2013 by Neil Garfield
    As I have previously stated, the Banks have literally stolen trillions of dollars from pension funds, municipalities, states, federal agencies, sovereign wealth funds and private investors. Estimates range from $3-$20 Trillion. So where did they put that money? They didn’t keep it in currency (too easy to trace and too easy to claw back). They are keeping it in natural resources which are (a) practically as liquid as cash and (b) likely to go up in value rather than keeping the stolen money in cash. The fact that they have already been fined for committing violations and crimes with the storage and movement of our natural resources is not stopping them any more than the fines and penalties they paid in the great group of mortgage-related settlements now totaling an estimated $200 Billion. Chump change when you have stolen trillions of dollars.
    The foreclosures? That’s just the finishing touch on the last scheme. Now the new one is starting in natural resources. They figure they have pretty much won the mortgage confrontation. Not on my watch!
    Millions of tons of metal stored in “shadow warehouses”

    29 Dec 2013, 12:52 AM Reply Like
  • manfredthree
    , contributor
    Comments (3157) | Send Message
    Our brains went into an overdrive of mathematical paranoia as we read this. Because that first half trillion they scooped can't be in Gold (all the gold even mined and in existence is estimated to fill one Olympic sized swimming pool) worth half a trillion or so. But, these nasty folks don't want attention drawn to their malfeasance, so they have totally avoided gold, silver and cash.
    So we looked for a 'most likely' medium of exchange for these thugs, and decided on aluminum ingots since they are fairly easy to cart about. One hefty guy in a balaclava can jog while carrying one under each arm. So, in ingot at a buck a pound, we worked it out to about 1500 Olympic sized swimming pools full of aluminum ingot. Actually, we think we know where two of these pools might be right under our noses in New Jersey, one actually disguised as an Olympic swimming pool but marked 'closed for the season'. Incredibly devious and ingenious.
    Undoubtedly, some of that ill-gotten gain is diversified into iron ore pellets, copper, and we suspect some 2X4 's that are disguised as zinc sticks.
    We suspect the ill-gotten gains will be short lived, but we well understand why they have opted for metals rather than pork bellies.
    29 Dec 2013, 08:05 PM Reply Like
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