INTERVIEW - LME open-minded on rent caps, changes unlikely before year-end

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Kathleen Retournekathleen.retourne@fastmarkets.comJoint News Editor - Europe+44 (0) 20 7337 2144

London 24/03/2015 - The London Metal Exchange has yet to make a decision on the capping of rents for metal stored in listed warehouses, head of business development Matt Chamberlain said.

A legal and warehouse consultation, an update of which was published in March this year, opened the door to a discussion surrounding the final elements of the warehouse reform package.

The most controversial of these was the reassessment of the possibility of capping or banning rents in queues and of capping the level of daily rents and free-on-truck (FOT) charges.

"It is a discussion - not a consultation. We have not made up our minds on the rent cap or on any of the discussion points," Chamberlain told FastMarkets on Tuesday.

Since pursuing this would open up the exchange to legal action, it wants market participants to be as sure as possible that this is a road they want to take, he added

The exchange had previously rejected the capping of rent on metal in queues due to the unacceptably high level of litigation and investment risk as well as the market disruption that could result.

"The LME would need to ensure that it has appropriate arrangements and resources to defend itself against such challenges, to carry on with the effective operation of the LME market in the short to medium term and to ensure that it continued to satisfy regulatory obligations," it said in its discussion paper.

Still, the exchange would not shy away from the issue simply because of the threat of legal action, Chamberlain said, adding that potential market disruption would be the greater issue.

The LME would take on board members' opinions since any disruptions in implementing the changes could trigger volatility, particularly in aluminium.

"They need to not just like the outcome but still find it sufficiently desirable [if we take] the bumpy route," Chamberlain added.

Views are invited until May 2, which would be followed by an update around June 2. If it decides to go ahead with a consultation, the exchange would need to include a clear breakdown on what the new rules would be and await the outcome on the consultation before the traditional three-month implementation period.

The exchange may implement a package of measures or may implement nothing at all. Still, a final decision is unlikely until the end of the year - Chamberlain indicated December or January.

"The LME is open-minded - we are still forming a view" Chamberlain said.


(Editing by Mark Shaw)



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