By Douwe Miedema
NEW YORK (Reuters) - The U.S. commodities markets regulator is still keeping tabs on the London Metal Exchange as the 137-year-old exchange tries to resolve an ongoing crisis over its warehousing policy that end users say has inflated prices and distorted supplies.
In an interview with Reuters, Timothy Massad, the newly installed chairman of the Commodity Futures Trading Commission (CFTC) said the regulator has been in touch with the LME as it prepares to launch a new aluminium contract in a bid to ease concerns that global aluminium pricing is broken.
"We've had a dialogue with them (the LME) about some of those issues and will continue to do that," he said.
The comments come a year after the CFTC launched a probe into complaints from consumers like Coca-Cola Co (N:KO) and MillerCoors LLC, which use the metal to make cans, about long wait times to take physical delivery of metals and record high prices.
Consumers say Wall Street banks, including Goldman Sachs Group Inc (N:GS), and major commodity merchants like Glencore Plc (L:GLEN) have run a lucrative business building up big aluminium stocks, charging rent to store the metal and delivering it only at a limited rate.
Massad on Tuesday declined to comment on the status of the CFTC probe, but the comments were his first on the matter since being appointed to lead the agency in June and some of the most candid by a CFTC commissioner since the controversy flared up last summer.
The regulator has faced increasing pressure from aluminium users who have called on the CFTC to step up oversight of the oldest and biggest metals market and its warehousing network.
While the LME is regulated by the UK's Financial Conduct Authority, the CFTC has jurisdiction over its U.S. business through a 2001 no-action letter and the exchange's application to give it foreign board of trade (FBOT) status.
Restoring confidence in its aluminium contract, its biggest in terms of turnover and liquidity, and overhauling its warehousing policy have plagued the LME for years.
Consumers say the LME's mainstay contract is broken because of the yawning gap between the futures and the physical market.
One solution was a new contract which will represent the premium, or the charge paid on top of the LME benchmark for physical delivery.
But end users have raised concerns about the delivery procedures for the new contract.
"They're trying to address that and we'll kind of see where they go on that," Massad said.
(Reporting by Douwe Miedma, writing by Josephine Mason; editing by G Crosse)