Aluminium rents to rise in 2015

LME registered warehouses will raise average rental rates for aluminium by 3.6 per cent this year, which is more than double the increase for the previous year according to Reuters.

Owners of London Metal Exchange warehouses had hugely inflated rental revenues by letting queues swell for buyers of LME futures contracts to withdraw metal from their sheds.

To remedy this, the LME last year announced plans to reform the system that included linking load-in to load-out rates and cutting maximum warehouse queues to 50 days.

The planned changes have already reduced queues even before they come into effect this year, cutting rental revenues for warehouse owners, including global trade houses.

Much higher rents could have offset the impact of the reforms, but previous hikes helped prompt legal action by industrial users of the LME, pressure from the LME itself, and scrutiny by regulators.

As a result, warehouse owners will, from 1 April, raise average rental charges by 3.5 per cent – weighted according to the size of their stocks – a similar level to last year’s three per cent average increase, according to an LME members notice.

In 2012, the average rental increase was seven per cent.

Average rents for aluminium, the most widely backlogged metal, will rise by 3.6 per cent from 1 April, the LME told Reuters News Agency.

The wait to remove aluminium from LME-registered sheds in Vlissingen, one of the storage locations with the longest queues, fell last month from 637 to 555 days, still well over a year but moving down.