March 29, 2019 / 11:12 AM / a month ago

Factbox: LME sets out proposals to change warehousing rules

LONDON (Reuters) - The London Metal Exchange (LME) launched a discussion paper on Friday setting out proposals from its warehousing committee.

A worker walks through an aluminium ingots depot in Wuxi, Jiangsu province September 26, 2012. REUTERS/Aly Song/File Photo

The LME itself has also put forward some proposals to improve market transparency. The discussion paper covers nine specific proposals, in three categories.

Proposals regarding warehousing services:

— Changes to queue-based rent capping (QBRC). This would involve extending to 80 days the length of time that full rent is payable on metal waiting to be loaded out. That compares with the current 30 days of full rent and 20 days half rent.

— Limitations on “evergreen” rent deals — agreements between warehouses and metal owners to share rental income — are also suggested. These deals allow owners to keep receiving rent on metal they have sold.

— A possible reduction in headline warehouse charges.

Operational proposals to make LME warehousing more efficient:

— Market-wide adoption of electronic certificates of analysis, so that relevant documentation can be more easily provided to those taking receipt of metal in LME warehouses.

— Clarification on whether warehouse operators loading-out more than the minimum requirements may apply different rules to additional load-outs. Some warehouse firms believe this may provide greater operational flexibility to clients.

— Denomination of free-on-truck (FOT) charges in dollars, rather than the current model of local currency.

Proposals to enhance market transparency:

— Eligible stock reporting, whereby stocks of unwarranted metal in LME-registered sheds would be publicly reported, hence enhancing market transparency as to total global metal stocks.

— A possible change to stock reporting, which could reduce the potential for market participants to cancel and then re-warrant stock purely for the purposes of influencing LME stock reports.

— A stipulation that copper cathode can only be warranted if it bears a unique and indelible identification label, allowing more reliable traceability of copper back to its producer.

Reporting by Pratima Desai; editing by Elaine Hardcastle

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