Malaysian delisting could widen LME spreads, push metal elsewhere

The delisting of Malaysian warehouses by the London Metal Exchange in the event that they are not exempted from a new tax, which comes into force on April 1, would see more metal flow to other locations in Asia and ease spreads in the futures market, market sources said.

They were responding to a notice from the LME on Monday March 16 that noted that, in order to be locations for delivery, warehouses must be in places where there are no taxes on storage charges. “My understanding is that the LME have been expending a great deal of effort behind the scenes to resolve the issue but, with the clock ticking and little progress made, their hand has been forced into communicating a contingency plan to the market,” one senior source at a warehousing company said. Many of those polled by Metal Bulletin said they believe that some form of resolution is likely, since imposing taxes on a bonded zone is against the very point of such areas and argued that the Malaysian government would not want to harm its ports’ position as delivery points for both warrant and off-warrant material. “I expect the situation will get resolved with the...

Published

Mark Burton

Shivani Singh

Deepali Sharma

March 17, 2015

16:03 GMT

London, Singapore