No more queuing – LME embarks on warehouse review
The London Metal Exchange embarked on a formal review of its system of 600 warehouses around the world on Wednesday.
Reuters reports LME’s warehousing operations “have been dogged by controversy since big banks and trading houses including Goldman Sachs and JP Morgan Chase bought warehousing operations.”
LME regulations allow firms to release “a fraction of their inventories each day, leading to long queues to collect metal,” but will now mandate new daily out-flow rates for nickel and tin.
LME shareholders last week approved the Hong Kong’s stock exchange operator’s $2.2 billion offer marking a new era in the 135-year old exchange which handles some 80% of global trade in metals futures.
Warehouse levels of copper has been a particular point of contention with the re-emergence of a dominant market player in copper stocks that could squeeze the market just as it did in April.
Earlier in the year an “entity took control of up to 90 percent of cash contracts and inventories on the LME, facing off against Chinese market participants who were caught with short positions”.
That entity was widely believed to be Swiss commodities trading giant Glencore.
LME copper stocks had fallen dramatically since the start of the year and have not improved significantly since hitting the lowest levels since the 2008 recession during the northern hemisphere spring.
The copper price is also at or near backwardation – tocks for delivery in three months are cheaper than cash copper for immediate delivery– as was the case in April.
Copper futures were trending higher on Wednesday with three-month copper trading down a fraction at $7,581 a tonne. Today’s levels are well within marginal costs which for copper producers are in the $6,000 – $7,000 a tonne range or roughly $2.75 – $3.15 a pound.
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2 Comments
Brouxhon
The international bankers do not only manipulate coomodity prices and the currencies of the Western world, they have also cornered the world warehouses of maufactured commodities, such as copper. They therefore control the supply and the demand equation of what is traded, which in effect makes an illusion of free trade.
Srfhtm
Exactly. Nail on the head. I have only begun to invest in the last year and have learned much about manipulation.
It should be obvious to anyone who knows how to read between the lines and with the buying of up to 50% of global gold production by banks and the increased rate of buying that they will use commodities to bring themselves out of debt.
You always have to be aware of conspiracy in news and take each article just as that and not listen to the ‘Big Guys’ like Bernanke who stated that he did not see a need for QE3