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LME Warehouses’ Delivery Rate May Increase by 500 Tons a Day

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Nov. 15 (Bloomberg) -- Warehouses approved by the London Metal Exchange may have to raise minimum rates for deliveries from stockpiles of industrial metals in an effort to curb lengthy waiting times.

Current minimum rates may increase by 500 metric tons for warehouse companies with at least 30,000 tons of a metal scheduled for delivery at a single location, the LME said in a notice to members today. Comments on the proposal are due by Dec. 7 and the new policy will take effect next April, it said.

The LME, where investors bought and sold contracts worth $15.4 trillion in 2011, in April doubled the minimum delivery rate for warehouse companies with the largest stocks. It said in August daily requirements to deliver nickel and tin would be added next April. Comments on the rules singled out the waiting period required to withdraw aluminium, the exchange said today.

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 macroeconomic forces at play in the aluminum industry.”

Cobalt, Molybdenum

The separate minimum delivery requirement for nickel and tin will remain in place regardless of whether the 500-ton increase takes effect because “the rationale for treating nickel and tin differently remains,” the LME said. Separate rules also apply to cobalt and molybdenum.

Minimum delivery rates now require daily release of at least 3,000 tons of any metal from stocks exceeding 900,000 tons at a single location. Withdrawals can take as long as 59 weeks in Detroit, which has 1.63 million tons of total inventories.

The city is the LME’s biggest repository for aluminium, holding 1.40 million tons of the lightweight metal. Orders to remove aluminum from local warehouses come to 820,225 tons, or 92 percent of earmarked inventories, compared with 40,625 tons of lead and 10,100 tons of zinc.

Withdrawing aluminum held in Vlissingen, the second-biggest LME location for the metal, may take as long as 54 weeks. The exchange in April removed the Dutch port from its list of locations to store copper after a recommendation by a committee.

An LME steering committee that reconvened in October to review the delivery rates comprises Chief Executive Officer Martin Abbott; Deputy CEO Diarmuid O’Hegarty, who also is director of compliance and regulation; and Robert Hall, head of physical operations.

To contact the reporters on this story: Agnieszka Troszkiewicz in London at atroszkiewic@bloomberg.net; Maria Kolesnikova in London at mkolesnikova@bloomberg.net

To contact the editor responsible for this story: John Deane at jdeane3@bloomberg.net

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