LME warehouse queues develop after fresh cancellations in July

Warehouse queues emerged at London Metal Exchange-listed sheds in July after a surge in cancellations last month, especially in the exchange's aluminium inventory, according to LME data.

Queues have appeared at C Steinweg's warehouses in Port Klang, Malaysia, with wait times of 27 days for copper, lead, aluminium and zinc compared with none in June. Cancellations surged by almost 700% in July to 27,166 tonnes, with only 1,145 tonnes left on warrant at Steinweg's sheds in Port Klang, the LME said in its latest monthly queue report. 

Steinweg also saw the queues at its LME warehouses in Singapore grow to 26 days in July from three days in June for the same four metals. Cancellations nearly doubled there last month to 32,684 tonnes, with Steinweg still holding 55,459 tonnes of metal as of the end of July. 

A queue of 13 days also appeared at PGS warehouses in Antwerp, Belgium, for copper, lead, primary aluminium and zinc. 

Small queues of five days have emerged at Access World's warehouses in Incheon, South Korea, and Kaohsiung, Taiwan, for copper, lead, primary aluminium and zinc. 

There was a wave of fresh cancellations across the metals in general in July despite tight LME spreads in aluminium and zinc. Aluminium in particular saw fresh cancellations of 206,025 tonnes compared with 52,625 tonnes canceled in June. 

Copper saw 24,925 tonnes canceled in July, nickel 15,270 tonnes, zinc 29,325 tonnes and lead 25,350 tonnes. 

Warehouse reform has been a major focus for the LME for years. In an effort to eliminate warehouse queues and allow for the functional withdrawal of metal, the LME toughened its queue-capping measures in 2013 when it introduced the linked load-in/load-out rule (LILO), forcing operators with a queue to deliver at least as much as they take in. 

The exchange later introduced queue-based rent-capping rules (QBRC), which were implemented in May 2016, directly affecting warehouses’ revenues and accelerating queue declines.

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