SHANGHAI, Nov. 12 (SMM) - The London Metal Exchange (LME) announced November 7 that it has modified proposal to affect all warehouses with queues of more than 50 days.
The changes followed a three-month consultation period that began in the wake of criticism over lengthy queues for access to metals tied up in warehouses and rising premiums.
Under the initial proposal in July, LME-registered warehouses experiencing outgoing delivery delays of 100 days or more would have to ship out more metal than they take in.
However, the new rules, which mark a sharp shift in favor of consumers, apply to warehouses with queues of 50 days or more. The new rules are scheduled to take effect on April 1, 2014.
Some market participants are worried that LME’s new warehousing rules may lead to a massive flow of aluminum into the spot market and send aluminum prices down. The US Justice Department and Commodity Futures Trading Commission (CFTC) launched investigations into investment banks such as Goldman Sachs for allegedly inflating metal prices. This prompted Goldman Sachs and Glencore Xstrata to consider selling metal warehousing business under them. Nevertheless, LME aluminum prices have been hovering at low levels since July, showing no notable downward trend.
It is complained that warehousing firms have artificially delayed the length of time needed to get metals out of warehouses, allowing them to raise rents and physical premiums customers must pay to get quick access to metals such as aluminum.