The London Metal Exchange (LME) is considering significant changes to its warehouse rules, potentially replacing existing rent caps with a fixed daily load-out rate. As part of a consultation on enhancing its physical market infrastructure, the LME is proposing a daily load-out requirement of 1.5% of metal on warrant, which is a title document conferring ownership. The current system lowers rent to zero if a warehouse fails to load out the required metal within 80 days.
The LME consultation, open until May 8, will also consider exempting cancellations exceeding 10,000 metric tons from the 1.5% requirement. This exemption aims to prevent larger warehouses from being disincentivized from accepting more metal. Additionally, the exchange is proposing to freeze rent and free-on-truck (FOT) charge cap rates for another five years, from April 2027 to March 2032. FOT charges are fees levied by LME warehouses to prepare metal for truck transport.
Furthermore, the LME is seeking input on whether to discontinue “evergreen” rent deals. These deals allow a company placing metal on warrant in an LME warehouse to receive a portion of the rent collected from the new metal owner. The exchange believes that requiring all warehouse companies to audit their information barriers would ensure good practice in relation to confidentiality of stock information.
The consultation will also reassess the need for indoor aluminium storage and consider introducing a certificate of analysis requirement for copper, the only metal currently without one when put on warrant. The London Metal Exchange is a global marketplace for trading industrial metals futures and options contracts. It also sets global standards for warehousing and the physical delivery of metals.
