NEW YORK After
months of paying high incentives to attract aluminum, copper
and zinc into storage, warehouse companies have gone shy.
Proposed changes to
the London Metal Exchanges warehousing rules have already
led warehouses to back away from attracting material into
locations with long queues to access metal, a move they said
will continue while they fully evaluate the implications of the
Plcs Pacorini Metals, Goldman Sachs Group Inc.s
Metro International Trade Services and Trafigura Ltd.s
Nems Ltd. are the three big warehousing companies that would be
impacted most by the new rules, which would link load-in and
load-out requirements at locations with delivery wait times of
100 calendar days or more.
Many warehouses said
that incentivesand therefore premiumscould drop to
about $50 per tonne at locations where queues are below 100
days. And warehouses are saying that if a request to warrant
metal would push a locations queue above the 100-day
level, they might even seek incentives from the owner of the
To ensure they do not
miss out on new business altogether, warehouse companies said
they are likely to encourage the movement of metal into
locations storing less material.
More than half of the
LME warehouse locations approved for zinc do not contain any
zinc, while a third of them hold no copper and a fifth no
aluminum. Off-warrant material in locations with long queues
could move to these locations, while metal also is expected to
continue to move to cheaper, off-LME storage, warehouse
The fluctuation in
spreads has led to a similar fluctuation in cancellations, with
participants seeking to cancel and then rewarrant material,
depending on the structure of the forward curve.
are expected to hike rents as a result of the proposed changes,
something the LME acknowledged in its proposal.
are scheduled to submit their proposed rent changes at the
start of December, giving them time to reflect any changes made
to delivery rules in October before they kick in next