* Rumours circulated that Trafigura put NEMS up for sale
* Traders have logistical reasons for owning warehouse firms
* Trafigura not as successful in profiting from
(Adds detail, background, comments)
By Eric Onstad
LONDON, Dec 10 Commodity trader Trafigura said
it had no plans to sell its warehouse operations, responding to
speculation it wanted to spin off the business after the London
Metal Exchange (LME) tightened rules to reduce backlogs in the
Trafigura bought warehousing company North European Marine
Services (NEMS) in 2010 and later consolidated all of its
warehousing and logistics activities into its subsidiary Impala.
The LME, the world's biggest marketplace for industrial
metals, detailed a package of proposals in November to slash
queues to access metal following complaints, lawsuits and
The new regulations to take effect from April have the
potential to reduce profits for warehouse companies, which have
generated rental income from metals caught up in backlogs.
JPMorgan Chase & Co has been trying to sell its
Henry Bath metals warehousing unit but has not found a buyer.
A source close to the matter said last month that Goldman Sachs
planned to resume talks with parties interested in its
warehousing business, Metro International Trading Services.
Industry sources said talk had recently circulated that NEMS
was up for sale too.
"I can confirm that is absolutely not the case," Trafigura
spokeswoman Victoria Dix said on Tuesday. "NEMS is not for sale,
and it remains a wholly owned part of the Impala group."
Simon Collins, head of Non-Ferrous and Bulk Commodities at
Trafigura, said the company welcomed the LME's "bold" reforms to
"These decisions will make a strong and sustained
contribution to the smooth running of the LME system once they
come into force," he said in an emailed statement.
ADVANTAGE FOR TRADERS, PRIVATE FIRMS
U.S. banks such as JP Morgan and Goldman Sachs are under
pressure from U.S. regulators regarding their involvement in the
physical commodities business, including warehouses.
But commodity trading companies are not affected by those
"Certainly I don't see any of either Glencore or Trafigura
selling any warehouses. It wouldn't make sense," said an analyst
who declined to be named. "Glencore is a physical producer of
practically every metal in fairly substantial size with Xstrata,
and for Trafigura it's a core part of their business."
A trader who specialises in LME warrants, ownership
documents for warehouse inventories, said: "As a private
company, Trafigura may be in a better position to operate a
warehouse company than some others in the market."
Glencore Xstrata owns warehouse company Pacorini,
which is very active in the Dutch port of Vlissingen, which
holds over 2 million tonnes of aluminium and has some of the
longest queues among LME-registered warehouses.
The trader said sale rumours may have been sparked by
reduced activity at Antwerp, the location where NEMS is most
The quantity of LME metals stored at Antwerp has shrunk by
40 percent to 253,628 tonnes since July 1, when the LME released
initial proposals regarding its warehouse regulations.
A source in the warehousing sector said NEMS was not as
successful in creating queues and generating income from that
strategy as rivals such as Goldman and Glencore.
Trafigura "realised that there is this business model of
making a queue, so they tried to make one as well," said the
source who declined to be named.
"But they were a bit late to the game, and that made it
difficult for them. And had the LME rules not changed, they may
Some market participants have said trading firms were acting
within their rights and blamed long queues on the complexity and
cost of moving aluminium out of vast sheds in ports.
But growing criticism of the LME's storage network led the
exchange last month to slash minimum queues for metal and beef
up its powers to act against market abuse.
(Additional reporting by Susan Thomas; editing by Veronica
Brown and Tom Pfeiffer)