A JP Morgan analyst reported that if there is a change in the LME rules for warehousing of aluminum, it could have a major impact on aluminum producer profits. The profits of 2/3rds of the producers may turn negative.
JP Morgan and other banks are being investigated with regard to their use of LME warehouses. As owners of warehouses and members and owners of the LME, they control the rules of the game. The current rules of the LME make it very hard to take metals out of the warehouses; consequently, the available inventory is lower than what would be suggested by the warehouse numbers. The criticism is that this restriction of inventory costs aluminum users through the higher prices from less available supply. Of course, the producers are the beneficiaries of this lower inventory. So it is natural for the bank to tell the market that if the rules are changed, the producers will be harmed.
You change the rules and someone will be harmed.
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