EUROFER: Unfair Practices Under LME Policy Jeopardize Normal Functioning of Metals Markets
EUROFER believes that the “Load-In Load-Out” proposal is based on arbitrary factors. These should be re-assessed taking into account three key elements: market conditions, metal requirements of physical users and the specificities of warehousing sites.
The current proposal favors metal producers and non-physical users rather than physical end-users. Moreover, the “Load-In Load-Out” proposal will have a limited impact on the market in the short to medium term.
Therefore, this proposal will not remedy current bottlenecks in the supply of metals, long waiting times for delivery and higher premiums. This will negatively impact the final price of metals, driving up costs throughout the supply chain and so ultimately for EU consumers.
This situation, according to EUROFER director general, Gordon Moffat “will not only artificially inflate LME metal prices but also burden final consumers as well as the downstream processing chain with unnecessary costs”. In parallel, warehousing companies’ practice of charging rent for the stored metals in queues after an expected delivery should be cancelled or severely limited. Therefore LME’s current practices must be changed.
The LME proposal to reduce queues is seen by Gordon Moffat as “a first but insufficient step for solving the systemic flaws of the LME warehousing system.”
EUROFER encourages the development of worldwide-valid LME warrants and rules. These have to guarantee level playing field conditions and ensure a transparent and balanced functioning of the metals market for all participants: producers, traders and final users.
On 30 September, EUROFER submitted its contribution to the LME board regarding the public consultation on changes to LME policy. EUROFER urges the LME board to take adequate measures to improve the metals market’s flexibility and liquidity, so ultimately protecting EU consumers from unnecessary costs.