UPDATE 1-LME gives metal warehouses the chance to cut rents

(Adds further details, background)

LONDON, Feb 5 (Reuters) - The London Metal Exchange is giving its approved warehouses the chance to cut rent and free-on-truck levels for the year starting April 1, after saying last year it would look at capping charges due to plans for large rises.

Those that want to submit lower rates should do so before February 19 and the LME will publish the revisions by March 1.

“For the avoidance of doubt, any increases to rent and FOT rates for the period will not be accepted,” the exchange said in a release.

Last Decemeber the LME said it would investigate planned large rises in warehouse rents for 2016-2017 to see if it should cap charges as the the stock-weighted average rises for both rents and FOTs are significantly higher than in the previous two cycles.

The average stock-weighted increase for rents effective from April 1, 2016 is 10 percent, up from three percent the previous year. Free on truck (FOT) charges will rise 12 percent from two percent.

The charges “appear out of line with market comparables and as a result, the increases do not appear to be based on objective economic factors such as increased compliance costs as a result of new LME rules,” the exchange has said previously.

The world’s oldest and largest market for industrial metals has introduced a series of reforms to its approved global network of more than 650 storage depots in 38 locations, aimed at easing backlogs in withdrawing metal.

The delays have meant fat profits for some warehouses who collected rent as long queues built up.

Data from the exchange showed warehouse firm Metro International Trade Services, at the heart of a controversy surrounding queues to get metal released from storage, is planning to charge the highest rents for aluminium stocks in warehouses approved by the London Metal Exchange.

Metro is planning rent rises of more than 30 percent for the 12 months starting on April 1 at its warehouses in the United States, Italy, South Korea and Malaysia.

Metro’s charges for aluminium jump to 72 U.S. cents per tonne per day compared with 54 cents now. The average of all warehouse rents for aluminium from April will be near 50 cents.

The company, now owned by investment firm Reuben Brothers, was one of the first to create long wait times for aluminium at its storage facilities in Detroit more than five years ago when it was owned by U.S. bank Goldman Sachs.

From May, the LME will introduce its queue-based rent cap (QBRC), which means that the rent payable on metal stuck in a queue longer than 30 days drops by half and is eliminated altogether after 50 days.

Standard load-out rates from LME warehouses will also be raised again from March.

The 138-year-old exchange is owned by Hong Kong Exchanges and Clearing Ltd. (Editing by Adrian Croft, Greg Mahlich)