London 29/02/2016 - Two warehouse operators have reduced their 2016-2017 LME fees, lowering the average increase in warehouse rent among LME-registered warehousers to seven percent from the previous average of 10 percent.
The average increase in the free on truck (FOT) rate is now nine percent, down from 12 percent previously.
Reuben Brothers-owned Metro lowered its daily rent in its flagship warehouse location in Detroit to 60 cents from 72 cents while FOTs fell to 47 cents from 55 cents.
Istim - the Whelan family business - also cut rates in Detroit to 56 cents from the previous 60 cents.
The exchange gave listed warehouse companies 2 weeks to lower their rent and free-on-truck (FOT) charges before they go live on April 1
Despite the decrease, the LME remains "disappointed" that the stock-weighted averages are "still considerably higher" when compared to the previous cycles, it said. Last year's average increase in rent was three percent while FOTs rose two percent.
Although it worked with its warehouse operators this year to reduce what it called exceptionally high rates, this one-week revision period was offered on an exceptional, one-off basis, it added.
"The LME does not intend to repeat this process should the problem arise in future years, both due to the market uncertainty engendered by such a process, but additionally because this solution does not address the underlying problem - namely that the market will remain susceptible to this issue while the LME does not have the power to limit the rent and FOT rates submitted by warehouse operators," it said.
The exchange is now proposing to explore the possibilities for implementing a longer-term solution to high charges. It plans to publish in mid-March to the market a discussion paper outlining its options in respect of the implementation of powers to cap rent and FOTs.
(Editing by Mark Shaw)