Warehouses approved by the London Metal Exchange may be required to deliver more to reduce the impact that long wait times for certain metals have on access to other materials, according to a bourse proposal.
A warehouse company that has at least 30,000 metric tons of a certain metal scheduled for delivery at a single location may have to deliver an extra 500 tons of other metal on top of the existing minimum delivery rates, the LME said in a notice to members today. People wanting to comment on the proposal are asked to do so by Dec. 7, the bourse said.
The LME will require warehouses to deliver at least a further 60 tons of nickel or tin, or both, each day from April, it said in August. A steering committee, which reconvened in October to review the minimum delivery rates, received 13 comments on the rules, the bourse said. The exchange doubled in April a minimum amount required to be delivered by warehouse companies with the largest stockpiles.
The existing requirement “goes as far as is reasonable to address the effect on the aluminum market of long aluminum queues in some locations,” the exchange said in the notice. “Such queues are the result of broader macro-economic forces at play in the aluminum industry.”
Comments submitted to the steering committee identified issues including a possible effect on the aluminum market of long aluminum wait times in some locations and the possible effect on other metal markets, according to the notice.
Current LME minimum delivery rates require at least 3,000 tons of any metal to be delivered each day for stockpiles above 900,000 tons at a single location. Metal buyers have to wait as long as 59 weeks for metal in Detroit, which stores 1.63 million tons of metals. A total 820,225 tons of aluminum, or 92 percent of all bookings there, await delivery, compared with 40,625 tons of lead and 10,100 tons of zinc. Detroit is the biggest LME repository of aluminum.
Owners of aluminum in the Dutch port of Vlissingen, the second-biggest location for the lightweight metal, may have to wait as long as 54 weeks for metals there. The LME delisted Vlissingen as a location for copper storage in April after a recommendation by the exchange’s copper committee.