Proposals to modify London Metal Exchange rules to attract more metal into its system would help boost stocks and revenues for warehousing firms and improve transparency, LME chief executive Matt Chamberlain said, reports Reuters.
Sweeping reforms since 2013 aimed at shrinking queues in LME approved warehouses are one reason behind stocks of metal such as aluminum sliding to near one million tonnes, the lowest in more than a decade, from a record high above 5.49 million tonnes in January 2014.
Historically, some of the surplus in the aluminum market in recent years would have been deposited under LME warrant.
"The argument is that there is more metal out there, people would make more use of LME warranting if circumstances were different. That would be good for warehouses and good for the market," said Chamberlain said.
"We want to be sure (warehouses') business models remain financially viable. Rolling back all the rules wouldn't be acceptable to the broader market, but we would support changes that make it easier for warehouses to do business."
The proposals made by warehousing firms and published by the LME in a discussion paper on Friday include extending to 80 days the length of time that full storage fees are payable on metal waiting to be loaded out. That compares with the current 30 days of full rent and 20 days half rent.
"Some warehouse operators believe this may enable them to attract and incentivize larger quantities of stock into LME storage, while still providing protection for metal owners against structural queues," the LME said.
"The possible consequences of such an amendment...would be the ability of warehouses to exhibit queues of 80 days before being affected by financial penalties."
