LME board makes decision on warehousing, gives no details

LONDON – The London Metal Exchange (LME) decided on Friday whether to overhaul its controversial warehousing network which is plagued by backlogs, but said it would only reveal details later.

The world's biggest and oldest metals marketplace has come under increasing regulatory and legal scrutiny over its metal storage practices, with complaints about long queues to withdraw physical metal from its warehouses.

"An in-principle decision has been made, and an announcement will be made in due course with the results and details of the consultation," a brief emailed statement said following an LME board meeting.

The statement did not say why the LME - acquired by Hong Kong Exchanges and Clearing last year for $2.2-billion - was delaying the announcement and spokesperson Miriam Heywood said no further comment was available.

In July, the LME proposed new rules to overhaul the delivery system from next April that would force warehouses to release more stocks once the wait-time breaches 100 days.

Clients of the warehouses say the system inflates prices for aluminium, mainly used in packaging and transport, even though the market is in global oversupply.

This has resulted in US-based lawsuits by consumers, distributors and others alleging aluminium price-fixing and anti-competitive behaviour by investment banks, large trading houses and the LME.

Earlier this month the LME's new CEO Garry Jones said he was ready to fight the lawsuits, and that critics should not expect a silver bullet to fix their concerns with it.

The LME has been caught in the middle of criticism of the proposed new rules from both major producers and end-users of the metal.

Consumers, including brewer MillerCoors and aluminium products maker Novelis, want drastic changes to warehousing rules to bring down what they pay to get metal, known as a premium.

Earlier this week, Alcoa Inc, the world's second-largest aluminium producer, complained to British and US market regulators about the warehousing proposals.

Russia's United Company Rusal, the world's largest aluminium producer, has also publicly lobbied for the LME to leave its warehousing rules unchanged or risk damaging the whole market.

vertical slurry pump vertical sump pump Mining sump pump