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I thought we had a previous discussion here about the warehousing (delivery) bottleneck occurring (especially with aluminum), but I can't seem to find it right now. Anyway, the news:
The London Metal Exchange (LME) expects proposed changes to its warehousing rules to go some way to solve problems in the network of warehouses it monitors, Chief Executive Martin Abbott said at a news conference on Friday.
The LME proposed on Thursday a rule that warehousing companies that have 30,000 tonnes or more of a single metal in a queue should deliver out as much as an additional 500 tonnes per day of other metals stuck behind it in the queue.
This should alleviate the effect that queues, particularly of aluminium, are having on other metals, the LME said.
The London-based exchange currently allows warehouse operators, including banks and trade houses, to release only a small fraction, up to 3,000 tonnes, of their overall inventories each day.
These rules - along with financing deals that tie up stocks for years and concentrate them in warehouses where rent is cheap - have caused long queues for delivery of metal to consumers and an artificial tightness in immediate supply that pushes up costs.
In some warehouses, outward deliveries of a number of metals are being delayed by an inventory glut in aluminium, which would be described as the dominant metal.
"If 500 tonnes doesn't work, we will review it, but we expect it to work," Abbott said. If adopted, the proposal would come into effect from April 1 next year.
Analysts and traders said the move would not solve the problem of long queues but is nevertheless welcome.