The increase in orders to draw lead from warehouses monitored by the London Metal Exchange may be linked to traders moving the metal from one warehouse to another owned by their own company, Helen Matthews, an analyst at Brook Hunt, a Wood Mackenzie Ltd. company, said. The following comments were made by e-mail today.
“This situation has occurred in both aluminum and zinc previously, and it now looks as if it is happening in lead.
“It seems to be metal being moved between warehouses by traders that probably already own the warrants but have the metal stored in rival warehouses.
“They cancel the warrants and move the metal to their own warehouse to reduce the rent they have to pay to other warehouses and of course it is cheaper for them to hold their own material in their own warehouses.
“Once in the warehouse, the metal can go back on warrant and if the warrants are bought and the metal stays in the warehouse then the trader gets the benefit of the rent.”
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