London Metal Exchange launches consultation on warehouse queues

City A.M. Reporter
THE LONDON Metal Exchange said yesterday it had launched a three-month consultation on changes to metals warehousing rules, aimed at reducing long queues that end-users face in getting material.

The general principle of the exchange’s proposal is a requirement to link load-in and load-out rates for warehouses with queues that force people to wait more than 100 calendar days. Some firms running warehouses registered by the LME, the world's biggest industrial metals marketplace, have been making money by building up big stocks and charging for storage while they deliver metal at a limited rate to holders of LME contracts.

This has created tensions with consumers of the metals who say these storage plays have boosted prices for metal critical for their businesses and forced them to wait months for their metal.

LME rules currently stipulate a minimum delivery rate for metals stored in the warehouses it monitors. Warehouses do not have to ship out any more than that amount, which is 3,000 tonnes per day for a warehouse company holding more than 900,000 tonnes of metal in one location.

“We appreciate the market’s concerns on the current length of warehouse queues and have already brought in a series of measures to address the situation,” said Diarmuid O’Hegarty, LME operations chief.

Under the proposal, the LME will measure all of the metal loaded into a warehouse over a three-month period. If there is a queue of more than 100 calendar days the warehouse would be expected to deliver additional metal based on a formula.