NEW YORK Aluminum, lead
and zinc market participants see only a minimal impact on
supply and premiums if the London Metal Exchange adopts
proposed changes to warehouse load-out rules, which are
intended to alleviate queues for metal.
Under the latest proposals,
which would go into effect in April 2013, warehouses that hold
more than 30,000 tonnes of canceled material and have at least
30,000 tonnes of a single, "dominant" metal will be required to
deliver out an extra 500 tonnes per day of metals other than
the dominant one, if requested (
amm.com, Oct 15).
Substantial queues have
developed at the Detroit and New Orleans warehouses as large
amounts of aluminum and zinc have created bottlenecks, with
some buyers forced to wait until 2014 to receive their
In Detroit, where aluminum is
the dominant metal, 40,625 tonnes of lead had been canceled as
of Mondays close. In New Orleans, where zinc is the
dominant metal, 49,600 tonnes of aluminum and 29,350 tonnes of
copper had been canceled, according to LME data.
While most market participants
are still digesting the details and implications of the
proposed load-out rates, one lead broker told AMM
Tuesday that an acceleration of load-outs from Detroit
warehouses was unlikely to have much of an impact on the wider
"I dont think it will do
anything once the lead comes out. Id say it will be
absorbed, probably into the next battery season," he said.
He added that he still expects
"stiff premiums" to come into effect for lead, given the
overall shortage of primary lead in the United States.
One special-high-grade (SHG)
zinc consumer said that greater availability could lead to
improved supply in the wider market, but he wasnt
expecting to feel too much of an impact himself.
Primary aluminum traders
contacted by AMM also failed to see a dramatic impact
from the proposed changes.
"It will impact the locations
where there is a lot of other metal, but I dont think it
will impact (aluminum) premiums or prices," one producer said.
"Load-out rates for aluminum are the same."
The move also wont stop
the financing deals that created the queues in the first place,
a second producer said. As long as interest rates remain low
and the contango is in effect, traders will continue to profit
from shipping metal to LME-listed warehouses, he said.
"At the moment, metal is
scheduled to come out. The problem is theres more going
in. But we wont see a change in the Midwest premium until
the fundamental reason for putting metal in warehouse
Suzy Waite, New York,
contributed to this story.