Aluminium queues grow at Trafigura unit's UK warehouses

Author：Site  Source：Network  Click to rate：2263  Post time：2012-09-07

Commodities trading house Trafigura is the latest company to start allowing queues for metal to grow in warehouses monitored by the London Metal Exchange (LME), a practice critics say has tarnished the exchange's role as market of last resort.
Latest inventory data from the LME showed that 47,700 tonnes of aluminium are now in the queue for delivery out of warehouses in England's north eastern port region of Tyne and Wear.

LME data shows that all warehouses in that location are run by metals warehousing and logistics firm NEMS, bought by Trafigura in March 2010.

That means any consumer would have to wait more than six weeks to get metal, or pay an equivalent premium to take it straight away.

Trafigura was not immediately available to comment.

One of the functions of the LME, in the middle of a $2.2 billion takeover by the Hong Kong stock exchange, is to monitor a network of warehouses across the world, where industry can deliver metal to sell surplus stock in times of oversupply and as a source of material in times of extreme shortage.

But huge bottlenecks have developed, so users who buy metal through the LME's clearing system have to wait weeks to many months to get their metal - paying rent all the while.

Critics say the toleration of such long queues is designed by warehouse companies to increase income from rents, while the companies say the delays are due to genuine logistical difficulties of finding and moving large amounts of metal out of huge sheds.

Warehousing companies owned by Goldman Sachs and Glencore are already well versed in the practice of building queues out beyond a year, in the U.S. car manufacturing sector of Detroit, and in the Dutch port of Vlissingen.

The addition of a new player permitting delays in withdrawing metal threatens to clog the creaking LME delivery system even further.

Goldman Sachs bought U.S.-based warehouse and logistics company Metro International Trade Services in February 2010. Glencore, the world's largest diversified commodities trader, bought the metals warehousing unit of Pacorini in September the same year.

JP Morgan owns warehousing company Henry Bath.

LME shareholders voted last month to accept a $2.2 billion offer by Hong Kong Exchanges and Clearing Ltd <0388.HK> (HKEx) for the 135-year-old British institution. The deal is awaiting regulatory approval.