Claims that EC has started probe into storage at LME warehouses

City A.M. Reporter
THE EUROPEAN Commission is starting a preliminary investigation into steep surcharges and lengthy wait times to get metal from warehouses monitored by the London Metal Exchange, two sources with knowledge of the matter said yesterday.

The regulations of the LME, which is being acquired by Hong Kong Exchanges and Clearing, allow companies operating warehouses in the global network it registers to release only a small fraction of inventories each day.

The practice, along with financing deals tying up stockpiles, causes long queues for metal and an artificial tightness in immediate supply. As a result, the premiums industrial buyers pay above the spot price to secure physical delivery have been pushed to record highs.

“The EC is carrying out a preliminary investigation in an attempt to throw light on the queues at LME warehouses,” said one industry source with direct knowledge of the matter. “The EC wants to throw light on the malfunction in these markets in order to help metals consumers.”

The LME declined to comment on the reports yesterday.

The LME is currently conducting a six-month review of warehouse load-out rates as it struggles to deal with backlogs across its warehouse network.