March 9 (Reuters) - The London Metal Exchange said on Monday that existing caps on rent charged by its network of warehouses could be replaced with a fixed daily load-out rate. As part of a
LME to consider replacing warehouse rent caps with fixed daily load-out rates
By Tom Daly and Pratima Desai
LME Consultation on Warehouse Rent and Load-Out Reforms
March 9 (Reuters) - The London Metal Exchange said on Monday that existing caps on rent charged by its network of warehouses could be replaced with a fixed daily load-out rate.
Proposed Load-Out Rate Requirement
As part of a consultation on proposed enhancements to its physical market infrastructure, the LME said it may introduce a requirement to load out 1.5% of metal on warrant - a title document conferring ownership - on a daily basis.
Current System and Rent Adjustments
Under the current system, rent is lowered to zero if a warehouse fails to load out the required metal within 80 days.
Exemptions for Large Cancellations
The consultation, open for responses until May 8, will consider exempting cancellations of over 10,000 metric tons from the 1.5% requirement to ensure larger warehouses are not disincentivized from accepting more metal, the exchange said. Warrants are cancelled when the owner is planning to withdraw metal from the LME system.
Background and Previous Reports
Reuters reported in early 2025 that the LME planned to launch a consultation on revamping its storage rules to tackle warehouse gridlock.
Additional Proposals in the Consultation
Rent and Free-on-Truck Charge Cap Rates
On Monday, the exchange said it was also proposing freezing rent and free-on-truck charge cap rates for a further five years from April 2027 to March 2032. Free-on-truck, or FOT, charges are fees levied by LME warehouses to prepare metal for transport on a truck.
Effectiveness of Rent Capping
Rent capping has failed to stop queues from forming when large amounts of metal are cancelled for delivery.
Auditing Requirements and Confidentiality
Evergreen Rent Deals
AUDITING REQUIREMENTS
The LME also said it was interested in views on whether so-called "evergreen" rent deals should be ended. An evergreen rent deal entitles a company that places metal on warrant in an LME warehouse to a share of the rent collected from the new metal owner.
Extension of Auditing Requirements
Meanwhile, the consultation will also cover a proposal to extend auditing requirements for warehouse companies' confidentiality procedures to all warehouse operators. Current requirements apply only to those warehouse companies that have close links to an LME trading entity.
Ensuring Good Practice
"The LME believes that requiring all warehouse companies to audit their information barriers would ensure good practice in relation to confidentiality of stock information," the exchange said.
Other Consultation Topics
Storage and Certification Requirements
The consultation will also reassess the need for aluminium to be stored indoors and consider introducing a certificate of analysis requirement for copper, the only metal which currently does not need one when it is put on warrant.
(Reporting by Tom Daly and Pratima Desai; Editing by Diti Pujara and Jonathan Ananda)
