Does anyone know what’s hiding in the London Metal Exchange warehouses? Is what’s been reported the truth? The LME is attempting to make its reporting more transparent. Reuters’s Andy Home reports:
The London Metal Exchange (LME) is once again looking to shine more light on what lies in the shadows of its warehousing system.
The exchange’s daily stocks reports offer a rare hard data point in a murky statistical landscape for metal traders.
But their usefulness as a market signal has been steadily undermined by the emergence of a shadow LME storage function, which can mean large amounts of previously uncounted metal suddenly “arriving” in a single day.
The LME extended its stocks reporting requirements in 2020 to try to capture part of this shadow inventory. But the monthly reports have added only a little light and the LME concedes that calls for more transparency have only intensified in the interim.
Minds have been focused by last year’s nickel meltdown and the 146-year old exchange, owned by Hong Kong Exchanges and Clearing (0388.HK), is on a drive to rebuild confidence with both investors and industrial users.
Restoring trust in its stock reporting is an important part of the plan and the LME is now consulting on requiring warehouse operators report all eligible metal in their sheds, a move that would bring the exchange into line with its peers.
LME stocks have always been gamed but it’s become easier to surprise the market with super-size “arrivals” such as the 94,950 tonnes of aluminium warranted on Feb. 10 at Malaysia’s Port Klang.
It is physically impossible for such a large amount of metal to be loaded into a warehouse in a single day. Rather, the aluminium was already sitting there, ready at the stroke of a computer key to be electronically warranted.
Read more here.
