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LME to postpone launch of linked load-in, load-out rates


The London Metal Exchange will not be implementing its planned move to calibrate deliveries of metal in and out of certain of its approved warehouse locations on April 1 as originally planned, the LME said Thursday.

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The move follows the outcome of judicial review proceedings filed by Russia's Rusal, the world's largest aluminum producer, in the English High Court which sought to challenge the LME's proposed rule changes.

The producer had alleged that the market consultation which LME conducted before arriving at the decision was, among other things, unfair and procedurally flawed, and constituted a breach of Rusal's human rights.

"We continue to believe that Rusal's complaint was without merit in its entirety and are currently taking legal advice with regard to our options, including appeal or re-consultation," the LME said Thursday. "Accordingly, the implementation of the linked load-in load-out rule change will not take place on 1 April 2014 as previously scheduled."

Rusal welcomed the legal ruling.

"We...look forward to working closely with the LME, and indeed all key stakeholders, to ensure that the revised consultation period and subsequent rule changes serve to increase the integrity of price discovery and transparency across the market, which we believe are the key issues continuing to face the sector," said the company's CEO, Oleg Deripaska, in a statement Thursday.

Last November, the exchange introduced a package of warehouse reforms -- due to take effect from April 1 -- to address the issue of queues to get metal delivered out of warehouses.

Among a raft of measures, the key change is an amendment to LME warehouse regulations to calibrate delivery-out rates with delivery-in rates at warehouses where the queue to deliver out metal stretches to more than 50 days.

Essentially, any warehouse where the queue is longer than that period, and which chooses to keep loading in metal, would be required to adjust its load-out rate so that it loads out more than it loads in.


"We are disappointed with the outcome of the judicial review," the LME said.

"Although the court found in the LME's favor on nearly all substantive and procedural points raised by Rusal, and made no adverse comments on the substantive merits of the proposed changes to its warehousing policy, the court found in favor of Rusal on one specific procedural issue, that the consultation should have encompassed or made reference to the option of banning or capping rent in queues," the exchange added.

The court "recognized the LME's interest in taking action to manage the queues in accordance with its obligation to maintain an orderly market and ensure the integrity of its price discovery function," it noted.

Rusal said the award was issued in its favor as the presiding judge "found that the LME's original consultation and subsequent proposed rule change, were unlawful because fairness required the LME to consult on alternative options and, in particular, the option of the banning or capping of rents."

As a result of the ruling, the LME "will be required to carry out a fair and lawful consultation process which addresses the concerns of a number of market participants raised prior to and following the initial consultation process," the company added.

The other measures in the package of reforms announced last November "will continue to be implemented as planned," the LME said.

To support its mechanism of physical delivery the LME approves and licenses a network of warehouses and storage facilities around the world, currently running to more than 700 in about 40 locations across the US, Europe and Asia.

The LME does not, however, own or operate the warehouses, or the metal stored within them.

--Andy Blamey,
--Edited by Jonathan Loades-Carter,