LONDON Queues to obtain
metal from London Metal Exchange-bonded warehouses could lead
to further warehouse delistings, with Detroit being a prime
target, according to Ric Deverell, managing director and head
of commodities research at Credit Suisse Group AG.
Vlissingen, the Netherlands, was
delisted for good delivery of copper in 2012 following a
unanimous recommendation from the LME Copper Committee amid
concerns that queues to obtain metal would distort prices and
Queues in Detroitwhere
warehouses contain more than 1.4 million tonnes of aluminum,
almost 70 percent of which is in the form of cancelled warrants
waiting to be delivered outhave already been blamed for
inflated premiums for the light metal.
High numbers of canceled
warrants cause outbound delivery bottlenecks, meaning warrant
holders can face a wait of well over a year to receive their
When the Vlissingen delisting
was announced, market participants warned that concerns could
spread to other warehouse locations or metals, prompting
"(Further delistings are) quite
possible, with warehouses at which queues are the longest being
the most likely candidatesDetroit, Vlissingen, New
Orleans and Antwerp (Belgium)," Deverell told AMM
sister publication Metal Bulletin.
Financing deals have encouraged
the delivery of aluminum and zinc into warehouses in recent
years, Deverell said. "Aluminum, and for that matter zinc, are
two extremes where overall stocks are very high but,
paradoxically, much of the metal is tied up in financing deals
due to yields offered by their state of contango and low U.S.
Copper is less likely to be tied
up in financing deals, but is still impacted by queues caused
by large volumes of aluminum and zinc, he said (
amm.com, Feb. 8).
"This is less true of other
metals, including copper and nickel, where forward curves offer
less attraction for financing and hence tying up of metal. For
copper, the impact has been in reducing access to metal in LME
warehouses sitting behind large queues for aluminum and zinc
(notably New Orleans and Antwerp)," he said.
There have been some concerns
about prompt availability of nickel in LME warehouses and
suggestions that committees representing metals which, like
nickel, are not yet abundant in Vlissingen will want to move
fast to prevent a similar situation developing in their
The LME has already addressed
the issue by amending the minimum load-out requirements for
nickel and tin, Deverell said. "For nickel, LME queues have not
really been a problem, though the LME has taken preventive
measures mandating at least 60 tonnes per day of withdrawals of
nickel or tin from any warehouses starting April 1,
A version of this article was first published by AMM sister
publication Metal Bulletin.