COMMENT: Will warehouse streamlining save the LME billet contract?

After months of deliberation, the London Metal Exchange last week finally announced plans to delist six warehouses as good delivery locations for its ailing steel billet futures contract.

The contract is also being rebranded and will become a European and Eastern Mediterranean market once the delisting is complete. Warehousing queues in US locations, particularly Detroit, have been one of the issues plaguing the billet contract. Low deliver-out rates of just over 1,000 tonnes per day, and billet sitting behind huge aluminium stocks, meant Detroit billet warrant holders had to wait much longer than six months to take delivery of their material. This distorted the market and was partly responsible for LME billet prices trading at a large discount to physical prices. Metal Bulletin sister publication Steel First spoke to traders and brokers and asked whether the return to a regional focus and the delisting of problematic warehouses would save the contract. Return to a regional market “The LME’s reason for adding the warehouses in the USA was to create more liquidity, but well-documented issues around the warehouses, such as...


Nina Nasman

November 30, 2012

05:22 GMT