London 18/12/2015 - Warehouse companies have submitted increases - some significant - in rents and free-on-truck (FOT) charges to the LME for the year from April 2016 to factor in tougher rules on load-out requirements and queue control, sources told FastMarkets.
Rumours circulated this week that one warehousing company intended to raise FOT by up to 175 percent to around $100-110 per tonne from $32-40 currently but well-informed sources said such an increase was very unlikely to take place.
A report by Harbor Intelligence claiming that storage rates could rise to as high as 80 cents per tonne per day from around 50 cents now and FOT charges could spike up to $82-87 per tonne contributed to speculation over the possible submission of what would be the steepest storage fee increase in the history of the LME.
More realistically, increases in the range of 5-15 percent are more probable to reflect the higher costs associated with new LME rules and auditing, a well-placed source told FastMarkets, while another banked on rises of 3-5 percent on average.
"It seems that the LME has sent letters asking for specific justification of increases to lots of people," one source also said.
Warehouses with delivery queues - Pacorini in Vlissingen and Metro in Detroit - would seek a bigger increase in storage fees than others because they are most affected by new rules, in particular QBRC, a fourth source remarked.
Storage fees remained largely stable in 2015 compared with 2014 - daily rents increased by one cent per tonne on average for aluminium and 2.5 cents for copper, for instance, while FOT rates increased by around $1-2 per tonne.
This compares with an average increase in rent of three percent in 2014 and seven percent in 2013 or in FOTs of two percent in 2014 and eight percent in 2013, FastMarkets understands.
Warehouse companies must inform the LME of their fee intentions for the following year by December 1 each year and the LME must publish these maximum rental rates by December 31 before these fares come into effect on April 1.
Currently, European Commission competition regulation prevents the LME from setting, capping or influencing rents and FOTs although the exchange is taking advice on possible changes. For now, all it can do is ask warehouses to explain any fee increase and can ask them to reconsider but, ultimately, it is the warehouses that decide.
Last month the LME said that it would introduce queue-based rent caps (QBRC) as planned following an extended consultation that also covered load-out rate increases (LORI) and anti-abuse measures.
In fresh measures aimed at ending the long waiting times to get material from LME-listed warehouses, the LME will roll out QBRC from May 1 and impose LORI from March 1 next year. Warehouses will also have to supply information on incentive levels every quarter and carry an independent third-party 100-percent stock count at their cost at least once a year.
With further increases on the cards in LME warehouse rents, the disconnect with off-warrant storage costs - a source of many complaints in the past two years and a key driver of stocks into private storage outside the LME network - will remain in place.
Rents for off-warrant storage are reportedly as low as 5-10 cents per day and per tonne at present, some 5-10 times cheaper than LME rents.
(Editing by Mark Shaw)