The London Metal Exchange (LME) has launched a consultation on a proposal designed to cut warehouse queues.
The proposal presented to the market today suggests a way to both cut existing queues and prevent new queues from forming.
The proposal only targets warehouses with queues of more than 100 calendar days. These warehouses would be subject to new requirements to ensure that they deliver out more metal than they take in.
"We appreciate the market’s concerns on the current length of warehouse queues and have already brought in a series of measures to address the situation," says Diarmuid O’Hegarty, the chief operating officer of the LME. "This new proposal could help to alleviate the issue and we would like to hear whether market users agree."
The proposal operates by measuring all of the metal loaded into a warehouse over a three-month period. If there is a queue of more than 100 calendar days the affected warehouse would be expected to deliver out additional metal based on a formula.
For example, a warehouse currently required to deliver out a daily tonnage of 3,000 tonnes would, under the proposal, need to load out at least 1,500 tonnes per day more than it loads in. Additionally, if the current load-in rate of an affected warehouse exceeds the minimum load-out rate, then the warehouse would be required to deliver out tonnage equal to that excess.
The consultation will run for three months, until 30 September 2013. All interested parties are invited to contact Matt Chamberlain, head of strategy and implementation at the LME.
A final decision on whether to implement the changes is expected to be made at the scheduled Board meeting in October 2013. If the proposal is adopted, then the new rules would come into force on 1 April 2014.