LONDON (Reuters) - The London Metal Exchange (LME) has dismissed a complaint from miner and commodity trader Glencore over its inability to take fast delivery of aluminium from warehouses owned by ISTIM UK in Port Klang, Malaysia, two sources familiar with the matter said on Monday.
Sources had told Reuters earlier this year that Glencore’s complaint highlighted uncertainties in the LME’s storage rules, after industry reform sparked by accusations from consumers that banks and traders were hoarding metal in LME warehouses.
“The LME has recently received and decided a formal complaint in respect of warehousing. The LME would not comment on that specific complaint, or confirm the parties involved,” the LME said in a statement.
Both Glencore and ISTIM UK declined to comment.
London-listed Glencore bought 200,000 tonnes of aluminium on the LME late in January and made preparations to take that metal from ISTIM’s warehouses.
Metal entering the LME’s global warehouse storage network is issued with a title document called a warrant. To take delivery of metal from the network buyers need to cancel the warrants, thereby earmarking it for delivery.
To get the metal out quickly, Glencore moved to complete the formalities and create a queue of more than 50 days before the end of January, which would have activated the LME’s load-in, load-out (LILO) rules for warehousing, the sources said.
“The LME believes it appropriate to inform the market of matters of general interest arising from the complaint, and in particular the point at which a queue should be determined to arise for the purposes of the LILO Rule,” the exchange said.
After investigating, it has clarified its rules about when a queue to take metal out of its warehouses started for the purposes of triggering its load-out rules.
The definition of a queue includes the clause “circumstances where load-out requests cannot be serviced immediately”.
“It is not possible in practice for a warehouse to load out metal instantaneously upon receipt of a cancellation request and so ‘serviced immediately’ cannot mean ‘completed instantaneously upon request’,” the exchange said in a notice to members.
As a result, the LME said the words “serviced immediately” should be interpreted as “delivered as soon as practically possible, acting vigorously and without delay”.
Reporting by Pratima Desai; Editing by Veronica Brown and David Goodman