Matt Y writes a post here that the banks have finally made an enemy who matters in their manipulation of commodity markets:
“The key thing here is that while Goldman Sachs is a big company with political clout in the United States, so is MillerCoors. So is Coca-Cola. So are PepsiCo and the Dr Pepper Snapple Group. So is General Motors. When you get a situation where large industrial firms want the federal government to do something that banks don’t to do, then the odds of the banks losing get pretty good. You saw something similar in the debit card swipe fee debate where Walmart, Home Depot, and other major retailers were able to beat the banking lobby.”
I’d point out for a long time the price of aluminum was not important until about 6 months ago for the U.S. based auto parts manufacturers. The price of labor was more important because China could make parts and ship them here more cheaply than parts could be made in the U.S.
As a result, auto parts manufactures and more importantly, car makers like GM, didn’t have as big of an incentive to be concerned with wearhousing issues here in the United States. They were getting their parts from overseas, and so were only concerned with the price of aluminum in China.
Now that China and the U.S. have reached parity on cost, the auto companies are taking a much harder look at pricing here in the U.S. This is because they are sourcing parts from here.
I pointed out months ago we had reached a significant break point in terms of pricing of parts from China and we’d start to see some changes in our economy as a result. One of the changes we should expect is increased scrutiny of the market structure for base metals in the United States.