RusalSays LME Warehouse Rule Changes are ‘Irrational’Joe Schneider
The London Metal Exchange, the world’s biggest market for industrial metals, made “irrational and disproportionate” changes to its warehousing policy after unfair consultation, United Co. Rusal said in a lawsuit, according to Hong Kong Exchanges & Clearing Ltd.
Rusal filed the suit in the English High Court yesterday, seeking a judicial review, HKEx said in a statement. The bourse said the complaint was without merit and it will defend the proceedings. A copy of the filing wasn’t available. Rusal is the world’s largest producer of aluminum.
The exchange, founded in 1877, changed the rules in a notice on Nov. 7 in a bid to speed up withdrawals from warehoused stockpiles of metal amid consumer complaints that prompted scrutiny from U.S. regulators. Rusal also alleged the consultation conducted by the LME prior to the changes was “unfair and procedurally flawed”, HKEx said today.
“Implementation of the proposed changes to the warehousing policy will proceed as announced,” the exchange said.
The amendments affect depots where waiting times to withdraw stockpiled metals exceed 50 calendar days, according to the LME notice. The bourse also said then it would review its warehouse system every six months and was studying its powers to regulate warehousing companies’ charges.
Consumers of metals including brewer MillerCoors LLC complained that lengthy waits for stockpiled supplies inflated costs. That spurred U.S. regulators to subpoena documents from warehouse operators including a Goldman Sachs Group Inc. unit, according to people with knowledge of the probe. The changes are scheduled to take effect April 1.
Rusal urged the exchange to postpone the changes in a Sept. 25 statement, saying the new rules would reduce transparency and further distort the aluminum market. The company’s press office in Moscow confirmed in an e-mail it had filed a lawsuit.
Prices for aluminum, used in everything from beverage cans to aircraft, slumped 15 percent in 2013, heading for the second annual drop in three years. The metal fell to the lowest level since 2009 this month. The contract for delivery in three months rose 0.2 percent to $1,764 a ton on the LME today.