EXCHANGE - LME consults market on increased minimum load-out, rent cap

print Print this document.  Post this story to Facebook.
Kathleen Retournekathleen.retourne@fastmarkets.comJoint News Editor - Europe+44 (0) 20 7337 2144

London 01/07/2015 - The LME has launched a market-wide consultation on recommendations to increase the minimum load-out rate for metal stored in exchange-approved warehouses and to introduce a cap on the rent charged for metal in a queue, it said.

The two new proposals are the final elements of the 12-item warehouse reforms programme initiated in November 2013, it said on Wednesday.

These proposals were selected from eight reform options outlined in a discussion paper published in March, aimed at addressing existing and potential future queues at LME-listed sheds as well as the levels of rent and free-on-truck rates (FOT) charged by warehouse companies.

“We are pleased with the impact our reforms have already had in cutting queues at warehouses,” CEO Garry Jones, said. “However, the proposals we are putting forward today are necessary to ensure that remaining queues and related issues are addressed in accordance with our regulatory obligations and original aims.” 

Increasing the minimum load-out rate should speed up the reduction of queues by raising the minimum tonnage of metal that warehouses with a queue must load out on a daily basis, regardless of how much metal is loaded in.

The new minimum daily load-outs for warehouses storing between 150,000 tonnes and more than 900,000 tonnes range between 2,000 tonnes per day and 4,000 tonnes per day, scaled according to the amount of metal stored, the LME said.

The introduction of queue-based rent capping would also help to provide further certainty as to the elimination of existing queues, and could prevent the occurrence of future queues, the exchange also said.

Warehouse companies that fail to deliver out queued metal within 30 calendar days would be required to halve the maximum published rent charged to the affected metal owners.

After 50 calendar days, no rent could be charged at all. This would remove any economic benefit for warehouse companies in maintaining a queue.

To ensure no warehouse company is unfairly disadvantaged, queue-based rent capping could be implemented on May 1 next year, the LME suggested.

By this time the market can expect remaining warehouse queues to be below the 50-day threshold, meaning that all warehouse companies will be equally affected by the implementation of the new measure, it said.

“Mindful of the differing viewpoints expressed, the LME considered each proposal within a framework that is legally robust, objective and proportionate for the LME market as a whole," Matthew Chamberlain, LME head of business development, said.

The LME recognises that charge-capping may bring several benefits but notes it would have a significant effect on warehouse companies. It therefore proposes to take a ‘wait and see’ approach over charge capping.

 

(Editing by Mark Shaw)



Fastmarkets.com
mailto:press@fastmarkets.com
8 Bouverie Street, London, EC4Y 8AX, UK
+44 (0)845 241 9949