LME woos warehouses again with new proposals, seeks to attract stock onto exchange

The London Metal Exchange has announced new warehouse reform proposals - the friendliest to warehousers in seven years - that aim to make LME warehousing attractive again and encourage more metal onto the exchange.

In a discussion paper sent to members on Friday March 29, the exchange proposed relaxing queue-based rent capping (QBRC) to 80 days, lower rent and Free On Truck (FOT) fees, as well as measures to allow the market to break evergreen rent deals simply by cancelling metal rather than needing to deliver metal out. “The policy outcome is not to have more stocks on-warrant as such but to have enough stocks to allow physical settlement of our contracts” the exchange said. The proposals mark a turning point from seven years of action from the exchange aimed at cutting the likelihood of queues forming to receive metal. These efforts also resulted in less stock being warranted on the exchange, however. Since the start of the year, on-warrant stocks of copper have fallen to their lowest since 2005 at 21,600 tonnes on February 28, leading to wild backwardations in the forward curve despite placid market...

Published

Perrine Faye

Archie Hunter

Hassan Butt

March 29, 2019

10:53 GMT

London