SYDNEY (Reuters) - Hong Kong Exchanges and Clearing said it will contest a class action alleging it and others artificially inflated zinc prices, adding to a growing legal battle that has so far centred on aluminium.
Duncan Galvanizing, one of the oldest galvanizers in the United States, accused the Hong Kong bourse and its units the London Metal Exchange (LME) and LME Holdings, alongside Goldman Sachs Group, JPMorgan Chase & Co and metal warehouse operators, of conspiring since 2010 to manipulate the US zinc price.
"HKEx and LME management's initial assessment is that lawsuit is without merit and HKEx and subsidiaries will contest it vigorously," the Hong Kong Exchange said in a release.
The zinc lawsuit opens up a new legal front and signals the possibility of mounting expenses for the Hong Kong bourse following its costly US$2.2 billion (S$2.8 billion) purchase of the LME in 2012.
HKEx's earnings took a hit from legal fees in the first quarter, with operating expenses related to its commodities division - the LME - up by US$42 million, partly due to legal fees for US class action lawsuits and a judicial review in Britain.
The latest suit, registered in the Southern District of New York, is the first to include allegations over the impact of warehousing on the smaller, niche zinc market. Zinc is used to coat steel to protect against corrosion.
Some of the same counsel representing aluminium buyers that have lodged class actions are involved in the zinc lawsuits, HKEx said.
"In light of the class action nature of the complaints, HKEx understands that it is not uncommon for additional follow-on lawsuits of a similar nature to be filed in the United States once a class action has commenced," it said.
HKEx may not make further announcements each time it becomes aware of similar lawsuits unless there is significant new information regarding the claim, it said.