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CME Group’s recent decision to deny an aluminum warehouse registration by Istim Metals was influenced by feedback from metal market participants, some of whom objected to the listing, according to people familiar with the matter.
Istim, which already dominates metals storage on the London Metal Exchange, applied in July for accreditation as a delivery point in Gwangyang, South Korea, for CME’s Comex aluminum contract. CME sought input from market participants, some of whom raised concerns about a controversial fee increase announced earlier this year by the warehousing company at its LME-registered depots.
The feedback was a material factor in CME’s decision to refuse Istim’s application, said one of the people, who asked not to be identified because the matter is private. Some of the conversations took place last week, and the rejection was announced in a notice on Oct. 4.
The LME’s aluminum market has been gripped for weeks by a squeeze, as traders stuck in a months-long queue to withdraw metal from Istim warehouses in Malaysia came under pressure when prices moved against them. Normally it would make sense to simply redeliver the metal onto the LME, but Istim significantly increased the fee it charges for re-registrations. The fee was later partly reduced, but remains well above the industry norm.
Istim does not currently have any warehouses listed for metals storage with Comex.
A representative for Istim declined to comment.
(By Mark Burton)
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