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Every cobalt and molybdenum contract traded on the LME has the option of settlement through the delivery of physical material.
Physical delivery is an important part of the LME model and plays a vital role in creating ‘price convergence’ between the futures and physical market.
The LME does not replace the normal channels for the buying and selling of material and less than one percent of contracts actually results in delivery. Instead the LME is used as a market of ‘last resort’, whereby the physical industry can use the LME’s delivery option to sell in times of over supply and as a source of material in times of extreme shortage.
In order to support the delivery mechanism, the LME has approved locations, warehouses and producer brands:
Approved Delivery Locations
Approved Warehouses
Approved Producer Brands
Warehousing Costs
The LME does not operate the warehouses nor does it set the rates charged for rent or handling. These are matters of commercial negotiation between the warehouse and its clients, although the Exchange does publish the warehouse companies' maximum charges.
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