(Reuters) - A U.S. Senate committee will hold a hearing next week on whether banks should control physical storage of commodities, the HuffingtonPost reported, a signal that lawmakers may toughen their stance on this controversial but lucrative business for Wall Street firms.

Goldman Sachs Group Inc, JP Morgan Chase & Co and Morgan Stanley all have business units involved in the storage of physical commodities such as metals and oil, as well as being involved in commodities trading.

The Senate hearing will take place as a five-year grace period from the U.S. Federal Reserve that allows banks to hold physical commodities assets is set to expire before the end of the year.

The panel will hear on July 23 from beer and can maker MillerCoors and two experts who are critical of the banks' involvement in physical commodities and infrastructure, including businesses such as storage and transportation.

"When Wall Street banks control the supply of both commodities and financial products, there's a potential for anti-competitive behavior and manipulation," Sen. Sherrod Brown (D-Ohio), a member of the banking committee, was reported as saying in the HuffingtonPost.

"It also exposes these megabanks -- and the entire financial system -- to undue risk," he said in comments published on Tuesday.

The Huffington Post said representatives for Goldman and JP Morgan might also be asked to testify before the banking committee.

Both banks are reported to be seeking sellers for their metals warehousing business, which have brought them profits but equally strong criticism from industrial consumers.

Consumers charge that warehouse companies owned by big banks and trade houses have allowed queues of a year or more to build up at their London Metal Exchange-registered sheds.

The queues have prompted spot premiums for aluminium, for example, to rise to record levels across the globe, even as the market remains chronically over-supplied on paper, with LME prices depressed.

Rising premiums - paid over the LME cash price to cover physical delivery costs - hurt consumers who can not pass the costs on to their customers. In some cases, high premiums match or exceed their razor thin profit margins.

"The senate hearing focus on banks as the source of the problem to the exclusion of the large trading houses is I think misplaced," Robert Bernstein, partner at law firm Eaton & Van Winkle, said. "Warehouse companies are owned by large trading houses who are not banks."

Bernstein, who has represented copper consumers impacted by warehouse queues and rising premiums, said eliminating bank ownership would not solve the problem. "The LME has proposed new regulations which the market seems to think will break the logjam. I'm not saying that it will but it might," he said.

The London Metal Exchange proposed a major overhaul of its metals storage system earlier this month, which will link load-in and load-out rates for warehouses with a waiting time of more than 100 calendar days for material.