Goldman Sachs sells last mining asset
GOLDMAN Sachs closed a nearly 35-year era of investments in commodity assets such as power plants and refineries with the sale of a Colombian coal mine.
The disposal is the latest sign of how Wall Street banks are responding to pressure from US regulators and disappointing returns as raw material prices plunged.
Goldman Sachs has invested in physical commodity assets since 1981, when it bought what was then a small trading house called J Aron. Over the years, the company has owned oil refineries in Rotterdam, power plants in Virginia and Colorado, and warehouses to store aluminum and copper around the world. ket, pointing to the potential that prices had been artificially pushed higher,” Stefan Ljubisavljevic, an analyst at Macquarie Bank, said.
The consultations by Argus and IHS McCloskey, which ended last week, proposed narrowing the window for price assessments, which provide the basis for the API indexes from around three months to around two months from September 1.
“The proposed methodology change means that the current month does not contribute to
The US Federal Reserve has been working on a rule to rein in Wall Street ownership of commodity assets. Federal Reserve Governor Daniel Tarullo, who is spearheading the Fed’s regulatory efforts, questioned in March whether banks should be allowed to own such properties. “They’re the sort of things that are very hard to get a risk-management handle on as a banking regulator,” he said then.
The mine that Goldman Sachs sold to privately owned Murray Energy Corporation on Thursday is the last holding the bank had in a commodities asset, according to a person familiar with the situation. The sale does not affect the US bank’s index setting. This should reduce the ability of a producer to place unmatchable neardated bids on screen, which then feeds the index,” Ljubisavljevic said.
Both Argus and IHS McCloskey said they were reviewing responses to their proposals.
“We’ve identified that there could be ways to look at the assessment window and amend the methodology that will help with liquidity, so we have gone down the path of this consultation,” said John Howland, the commodity trading business, the person said.
Goldman Sachs chief executive Lloyd Blankfein has said several times during the past two years that trading remains at the “core” of the Wall Street bank.
Goldman Sachs and Morgan Stanley built large commodities operations, which become known as the “Wall Street refiners.” On top of trading commodities, both physical and derivatives, the banks invested heavily in assets. Pressure from regulators and investors since the 2008-09 global financial crisis, coupled with falling commodity prices over the past year, prompted the banks to sell. – Bloomberg senior director of coal at IHS Energy, which owns IHS McCloskey. “What we’re trying to do is concentrate liquidity into those two months.”
A spokeswoman for Argus said: “In our discussions with the industry, questions and suggestions had come up around changing the date range specification of some of our coal assessments. We are in continual discussion with the market, which from time to time crystallises into a formal proposal for change and is consulted