New fees threaten Antwerp's dominance in arabica coffee storage
* Around 60 pct of certified arabica held in Antwerp
* Rule change seen luring coffee to U.S. warehouses
By Sarah McFarlane
LONDON, May 2 (Reuters) - European warehouse firms fear that Antwerp will lose its dominance as a profitable storage hub for exchange-graded arabica coffee as new fees applied by Intercontinental Exchange benefit their U.S. rivals.
The "cost adjustment" fees are likely gradually to shrink the volume held in the Belgian port city, where around 60 percent of the world's certified arabica is now stored.
"In 12-14 months a lot of coffee will go out from Antwerp slowly and will not be replaced, while coffee will probably be delivered into American ports," a European warehousing source said.
Antwerp has been a prime location for owners of stored coffee because warehouses there attracted stocks partly by charging low rates for depositing material.
They later made money partly through higher charges on companies taking delivery to retrieve the commodity.
The change introduced in March by ICE, the main exchange for arabica coffee, will require anyone delivering beans to warehouses in locations with higher load out costs than New York, which is used as the benchmark, to pay a fee.
Antwerp faces the highest cost adjustment, at $1.62 per 60-kg bag.
Warehouses estimate the fee means an additional cost of between 13 and 17 euros per tonne, while some clients are ready to change warehouses to save as little as 3-4 euros per tonne.
The changes will mean that traders, when deciding where to store certified coffee, will be less swayed by the cost of moving stock into warehouses and more by fundamental factors such as where the consumer demand is.
Certified stocks are those that have been confirmed as good for delivery against ICE futures contracts. As they make up only part of total arabica stocks in Antwerp, which were around 4.8 million bags at the end of 2012, the port should remain the top location to hold coffee in Europe.
But the warehouse firms, mostly privately owned, are rattled.
"Warehouses have to react to this situation, we have to approach the exchange to know what's behind this, as we would prefer to be heard before any other potential changes are made," said Oswaldo Aranha Neto, managing director of warehouse keeper Pacorini.
"It's going to make Antwerp not in the market for fresh certified stock."
Asked why the exchange made the change, an ICE spokeswoman said: "The intent of the provision is to address the wide discrepancy between load-out costs in different delivery locations."
Warehouse companies said the exchange also aimed to reduce the concentration in one location of stocks of arabica - the higher quality variety chiefly used in ground coffee as opposed to robusta, which is largely used for instant coffee.
Antwerp warehouses held around 1.68 million bags (equivalent to around 100,000 tonnes and roughly $300 million in value) of certified arabica coffee as of May 1, of a total of around 2.73 million bags held in ICE nominated warehouses globally, according to exchange data.
"It would seem that the change would allow the other factors in the market to become more relevant; where should the coffee go, where are the users for it, the more fundamental reasons," one U.S.-based warehousekeeper said.
"(This is) as opposed to going to Europe just because of flat out cost savings on the way in," the executive added.
The changes follow complaints in recent years that the concentration of NYSE Liffe exchange-certified robusta coffee at a few Antwerp warehouses created a supply bottleneck.
IntercontinentalExchange Inc's agreement to buy NYSE Euronext, including its commodity trading arm NYSE Liffe, could mean certified robusta warehousing may soon be subject to similar fees. The deal is still subject to European Union antitrust approval, which market players say might require some NYSE Liffe contracts to be sold.
Problems with warehousing are troubling other commodities markets, notably in metals such as aluminium and zinc. Consumers complain of long queues to withdraw material in some facilities registered by the London Metal Exchange (LME).
ICE-licensed coffee warehouses in Antwerp include Antwerp Coffee & Cocoa Logistics NV, C. Steinweg NV, CWT Commodities, Durme-Natie CVBA, Henry Bath B.V., Molenbergnatie NV, Pacorini Antwerp NV, Unicontrol Commodity BV, Vollers Belgium NV and Wilmarsdonk.
Antwerp has long been a European trade hub due to its central location and warehouse companies expect it will remain a favoured place to store coffee when its final destination has not been determined and could be in northern or southern Europe.
"Antwerp is not just certified stock - it's still the most convenient and competitive European port for overall coffee stocks," Pacorini's Neto said.
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