February 19, 2010 / 4:39 AM / 10 years ago

Goldman to buy LME warehouse firm Metro

SINGAPORE (Reuters) - Goldman Sachs (GS.N) plans to buy U.S.-based warehouse and logistics company Metro International Trade Services, a Goldman Sachs spokesman said on Friday.

The official didn’t say how much the deal was worth.

Metro runs a global network of London Metal Exchange approved warehouses for primary aluminum, aluminum alloy, copper, lead, nickel, plastic, steel, tin, zinc and plastics.

Warehousing and financing are big business, with banks and other investors earning millions of dollars by buying cash metal cheaply and simultaneously selling it forward at higher prices, earning the difference.

The main cost of this “contango financing” is the fee that warehouse companies charge to look after metal. In the case of aluminum, maximum warehouse rents are set to rise by around 5 percent to just under 40 cents per tonne per day.

The discount for cash aluminum versus the three-month price is around $33, or 36.7 cents per day, making financing unprofitable without discounted rent deals or in-house storage facilities.

Reporting by Nick Trevethan; Editing by Michael Urquhart

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