JP Morgan, Goldman push judge to throw out zinc claims

31 January 2017 9:54am

30 October 2015. By Richard Vanderford.

Goldman Sachs, JP Morgan and Glencore asked a US judge Friday to dismiss an antitrust suit accusing them of conspiring to drive zinc prices upward, calling the claims implausible.

Zinc buyers who say they have been hurt by alleged metals hoarding haven’t substantiated claims that the defendants illegally conspired with each other, Richard C. Pepperman, a lawyer for Goldman, said at a hearing in New York federal court.

“The agreement is no more than conceivable,” Pepperman said. “It’s not plausible.”

US District Judge Katherine Forrest, who is presiding over the case, didn’t issue a ruling, but suggested that allegations of a 2012 meeting among the defendants might support claims of a conspiracy.

Zinc, one of the world’s most heavily mined metals, is used in a range of products, from metal fixtures to dietary supplements.

Goldman, JP Morgan and Glencore, a Swiss commodities trader, trade in the metal, and in 2010 bought warehouses used to store it.

The buyers behind the New York lawsuit claim that traders used control of those warehouses to keep physical zinc from reaching the market, driving up its prices, and coordinated timing to exacerbate long queues.

The companies, whose warehouses were linked to the London Metal Exchange, a leading metals market, wanted to “squeeze” supply and drive up premiums for the physical delivery of zinc, Bradley J. Demuth, a lawyer for the zinc buyers, said.

“This is akin to having the fox guard the hen-house,” he said. “They have essentially cornered the market.”

The defendant warehouses would, for example, allegedly fail to move out zinc or move it between warehouses to meet LME rules while frustrating legitimate buyers who needed the metal, the buyers claim.

The defendants have argued that the buyers have scant evidence of any kind of illegal coordination among them, having pointed only to a single 2012 meeting described by a confidential witness.

At the meeting, in fall 2012, the traders and warehouses they controlled allegedly agreed to give preference to their own metal orders.

“There’s no allegation here that anyone agreed to something that would lengthen the queue,” Pepperman said.

Plaintiffs shouldn’t be allowed to “bootstrap” claims of an ongoing five-year conspiracy to a single alleged event, he said.

Forrest questioned whether that meeting should be taken as a “window” into a broader conspiracy rather than its defining moment.

“You take it as a glimpse of an existing agreement,” she said.

However, Forrest also heavily questioned lawyers for the buyers in a hearing that lasted nearly four hours. She said she would rule later.

Forrest is also overseeing a related lawsuit over claims that similar constraints affected the aluminum market. Forrest has allowed some of those claims to go forward, saying the plaintiffs had put forward enough factual detail to proceed.

Demuth urged Forrest to let the zinc suit similarly go forward.

“It’s aluminum all over again,” he said.

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