Aluminum prices climbed by more than 10% from January through April this year, to rise above $1.22/pound before losing all it had gained and returning to about $1.10/pound. At today’s price of around $1.12/pound, about $2,476/metric ton, it remains questionable that the metal will hit an earlier price target of $3,200/metric ton.

With the end of the second calendar quarter on top of us, and a quarterly report on its way from first-out-of-the-gate Alcoa, Inc. (NYSE: AA), it seems like a good time to think about what’s going on with aluminum. For the most part, other aluminum producers, Century Aluminum Co. (NASDAQ: CENX), Alumina Ltd. (NYSE: AWC), Kaiser Aluminum Corp. (NASDAQ: KALU), Noranda Aluminum Holding Corp. (NYSE: NOR), and Aluminum Corp. of China Ltd. (NYSE: ACH), have also done well in the past 12 months. Noranda’s share price has more than doubled and even laggard Chinalco is up about 10%.

But at one time Noranda was up more than 150%, Century was up more than 120%, and Alumina Ltd. was up about 120%. All these high flyers gave a good share of that growth back when commodity prices collapsed in early May. But is something else going on?

Inventories have fallen from a record high of 4.71 million tons in mid-May to 4.53 million tons. A large part of that was due to a collapse in the carry trade, where it became unprofitable for traders to roll contracts forward.

The decline in global stockpiles has not so far lifted aluminum’s price. In fact, it’s just the opposite. Since the end of May the price has fallen about $0.045/pound.

But apparently not every trader is taking the weakness in aluminum lying down. Coca-Cola Co. (NYSE: KO) has filed a complaint with the London Metal Exchange against Goldman Sachs Group Inc. (NYSE: GS) and Goldman-owned warehousing company, Metro International Trade Services LLC. The folks at Coke are accusing Metro of bringing aluminum into its warehouses and then refusing to let the stuff leave, which causes delays in delivery, higher storage charges, and higher prices for aluminum.

Coke claims that Goldman/Metro paid cash incentives to producers like Alcoa and Rio Tinto plc (NYSE: RIO) to store aluminum in Metro’s warehouses during the 2008-2009 recession. Nobody wanted aluminum then, so producers were happy to get money. Since early 2010, Metro’s inventory has reportedly grown from about 850,000 tons of aluminum to 1.15 million tons.

According to Crain’s Detroit Business, “Between its 2010 peak and now, the amount of aluminum waiting to leave Metro International’s Detroit warehouses has risen 97 percent…. That metal’s value has risen 372 percent since its low in 2008.” Add in the cost of renting space at $0.42/ton/day in the Metro warehouses, and Goldman reaps a nice $230 million annually in revenue from the warehouses.

What this could mean is that the tightness thought to exist in the supply of aluminum is really not there. That could put some pressure on share prices of the aluminum producers who face either having to cut production or charge lower prices.

Alcoa, which reports quarterly earnings on July 11th, is expected to post EPS of $0.35 on revenue of $6.32 billion. Alcoa shares are trading up about 0.3% today, at $15.94, in a 52-week range of $9.81-$18.47. The median price target is $21/share, meaning there’s still a lot of room tor growth. But rising aluminum prices what seemed like a certainty just a few months ago might not be as buoyant as everyone thought.

Paul Ausick

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