WASHINGTON, April 9 (Reuters) - A U.S. congressman on Wednesday expressed concern to regulators about inflated aluminum prices as a result of the London Metals Exchange’s (LME) policies, urging the Commodity Futures Trading Commission to be tougher on the issue.
“The CFTC acknowledges that they have the authority to regulate and investigate concerns about the aluminum supply,” said Virginia Republican Bob Goodlatte, who was speaking at a meeting of the House Committee on Agriculture.
“End-users are concerned that the CFTC has been slow in taking action and looking into their concerns.”
Complaints about high prices from brewers and other aluminum users last year sparked frenzied scrutiny from politicians and regulators in the United States and elsewhere on the role of big banks in commodity markets.
Much of their wrath focused on vexing logjams within the network of LME warehouses - many owned by big banks and traders - something critics say is a deliberate tactic by the operators to charge storage fees over many months.
The LME - owned by Hong Kong Exchanges and Clearing Ltd - had started a consultation to reform the process, but the London High court last month put an end to that, condemning the process as “unfair and unlawful”.
Senator Sherrod Brown, an Ohio Democrat who has lead the charge against banks’ involvement in the physical commodity business in Congress earlier this year urged the CFTC to take an agressive stance on the issue.
The House Committee on Agriculture adopted a bill to adjust the CFTC’s mandate and several of its rules, a process known as reauthorization that roughly takes place every five years.
However, Goodlatte withdrew an amendment to the bill that would have required the CFTC to report in a year’s time to account for its oversight of aluminum markets. In return, the panel vouched to keep a close eye on the issue.
The bill now needs to go to the House floor, but few policy watchers expect it to become law because President Barack Obama’s administration opposes the changes. That means the Democrat-led Senate is unlikely to pass it. (Reporting by Douwe Miedema; Editing by Diane Craft)