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LME to cap warehouse charges as it finalizes reforms

The London Metal Exchange finalized its warehouse reform program, with plans to introduce caps on maximum rates charged by LME-registered warehouses effective Dec. 28.

The LME said Sept. 28 that it will introduce an initial schedule of maximum rates for warehouse rents and free-on-truck charges by calculating the average of the highest published charges for the years 2015 to 2016 and 2016 to 2017 on a per-metal and per-country basis.

The first capped charges will come into effect April 1, 2017, after which the LME will freeze the schedule of charge caps for five years, which is expected to allow "real-world" prices to converge closer to the frozen published rates.

After five years, the maximum prices will be updated annually based on the per-country consumer price index.

LME Head of Business Development Matthew Chamberlain said capping the charging rates will help stabilize the market.

"Having considered all of the consultation responses carefully, we are confident that the implementation of the charge-capping proposal is the simplest solution to address concerns over headline rates charged by warehouse companies," Chamberlain commented.