LME warehousing; all change or no change?
From Reuters India:
On the surface at least, much
has changed in the London Metal Exchange (LME) warehousing
business over the past year.
But take a deeper look, and it is clear that the underlying
structural problems are still there. The exchange has much more
work to do if it wants to rectify a delivery system that has
ruptured relations with some of its users and generated a spate
of lawsuits in the United States.
What the LME has done is add three new delivery locations,
extending its global warehousing network to Kaohsiung in Taiwan,
Moerdijk in the Netherlands and, for copper only, Panama City in
the United States.
Several new operators such as Whelan Metals, BTG Pactual and
Independent Commodities Logistics have joined the ranks of
registered warehousers, while other smaller companies such as
Erus Metals and Scale Distribution have expanded their
foot-print.
The exchange will also take some satisfaction from the
reduction in the number of delivery queues even though its
proposed rule change linking load-in to load-out rates is itself
log-jammed in the UK legal system.
Not yet revealed are the results of logistics and legal
reviews of the LME's warehousing system, commissioned by the
exchange. Either of them could yet prove as significant as the
LME's current assault on the queue model, which had been
exploited so efficiently by Metro at Detroit and Pacorini at the
Dutch port of Vlissingen.
Even after this series of changes, however, the exchange's
physical delivery function is still dominated by a handful of
players and, more problematically, by operators tied to some of
the world's most powerful trading houses.
AS SOME BEAT A RETREAT...
The total number of LME-registered storage units, excluding
those holding steel, contracted marginally over the last 12
months to 666 from 678, primarily due to cuts by those companies
most associated with load-out queues.
In the case of Impala Terminals, previously known as NEMS
before being rebranded by its owner Trafigura, the attempt to
build a queue at Antwerp never really got off the ground.
A rapid build-out in capacity has gone into reverse, with
the number of Impala sheds at Antwerp falling to 12 from 26 last
July as it scales back its LME ambitions.
Metro, currently owned by Goldman Sachs but with a "for
sale" sign on it, reduced its footprint by 12 units over the
last year, extending a retreat that began two years ago.
It is trimming its presence just about everywhere apart from
its core LME operations in Detroit, where it still runs 27 sheds
with 1.41 million tonnes of metal in them as of the end of June.
Even Pacorini, owned by Glencore, has tempered its previous
capacity surge, reducing the number of storage units in
Vlissingen by 12 to 41....MORE
