Warehouse Reform 2013 - 2016

In November 2013, following a three-month market-wide consultation, the LME launched a warehouse reform package with twelve key elements.

All of these elements have now been implemented, or are due to be implemented shortly:

1. Linked Load-In / Load-Out Rule (LILO) - including increased "decay factor" as of 1 August 2015
2. Separate steel load-out rate
3. Per-warehouse queue length report
4. Commitments of traders report 
5. Creation of the Physical Market Committee
6. Specific powers for the LME to address behaviour that creates or maintains queues (clause 9.3.4 – now clause 9.3.5 – of the Warehouse Agreement)
7. Information barrier policy review
8. Amendments to LME policies and procedures resulting from an independent logistical review 
9. Changes to the Warehousing Agreement following independent legal review
10. Premium futures contracts for aluminium — launched on 23 November 2015
11. LME powers to cap or stop rent in queues (queue-based rent capping or “QBRC”), implemented on 1 May 2016 alongside an increase in the minimum daily load-out rate (LORI), which was implemented on 1 March 2016
12. LME powers to address structural solutions to high charges — on 6 April 2016 the LME released a Discussion Paper exploring potential long-term structural solutions to the high levels of rent and FOT for LME metals storage. This closed on 18 May 2016 and the LME would like to thank all those who submitted feedback. The LME is now consulting on the proposed introduction of Charge-Capping (“CC”), designed to address this issue of high warehousing charges. The Consultation will run from 14 July 2016 to 19 August 2016 and the LME would like to invite feedback to this Consultation from all market participants during this time.

All the items outlined above are designed to address the need to ensure that the LME’s warehouse network fully serves the requirements of the global metals market.

Documents relating to LME warehouse reform can be found below. Should you have any questions, please contact us

28-Sep-16 Charge-Capping Results Notice

14-Jul-16 announcements

6-Apr-16 Discussion Paper on LME warehousing charges

25-Nov-15 LORI and QBRC consultation results

30-Sep-15 Further consultation on QBRC - proposed anti-abuse provisions

1-Jul-15 announcements

22-May-15 Outstanding items from the consultation on amendments to the policies and procedures relating to the LME’s physical delivery network

27-Apr-15 Increase in the decay factor under LILO

2-Mar-15 announcements

7-Nov-14 to 9-Feb-15 Consultations

LILO Re-consultation and Results Oct 14

Updates

Results of the Original Consultation 7 Nov 13

Original Consultation Notice 1 Jul 13

Other