LME seeks to shorten 100-day withdrawal times at warehouses

The London Metal Exchange, the world’s biggest metals marketplace, is seeking to speed up withdrawals from stockpiles in warehouses where waiting times exceed 100 calendar days.

Those warehouses would have to deliver out more metal than they take in, based on a formula, the LME said in a statement today. Market participants are being consulted until Sept. 30, the exchange said. Its board is expected to review the plan in October, and the proposal would take effect April 1 if approved, the statement showed.

LME users have said long waits for withdrawals helped to lift premiums for metals from aluminum to copper. The Beer Institute, representing members including MillerCoors LLC, last month urged the exchange to act to reduce waiting times. Sites with lengthy waits include Johor in Malaysia, the biggest LME copper repository, according to Societe Generale SA.

“If enacted, it will help address the issue, though it will be a gradual process,” said Leon Westgate, an analyst at Standard Bank Plc in London. “The main thing is it looks like it may improve competition in terms of other warehouse locations outside Antwerp, Vlissingen, Johor, New Orleans and Detroit.”

The LME has a network of 765 warehouses in 36 locations worldwide, the exchange’s website shows. There are only five sites where consumers must wait for withdrawals, according to Charles Li, chief executive officer of Hong Kong Exchanges & Clearing Ltd., which owns the LME.

Detroit, Antwerp

“We have undertaken this consultation because it’s important we listen to market participants when concerns arise,” Li said on his blog today.

Detroit, New Orleans, the Belgian city of Antwerp and Vlissingen in the Netherlands are the other locations with long waits for metal, according to Societe Generale.

The LME delisted 83 warehouses and other storage facilities this year as more metal was held in fewer locations. Vlissingen and Detroit account for 64 percent of aluminum inventories tracked by the exchange, and copper stocks in Johor, New Orleans and Antwerp come to 89 percent of the global total, figures compiled by Bloomberg show.

Under the proposal, all metals loaded into warehouses would be measured over three months. For waits of more than 100 days, daily deliveries out of warehouses that are now mandated at 3,000 metric tons would have to exceed inbound shipments by at least 1,500 tons.

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