Find out what millions of sellers are selling right now.
Find out what millions of buyers are buying right now.
Search Lead Business Directory for suppliers and buyers.
Find out about Lead Trade Shows & Events.
London
[]
Posted on : Jun 01, 2015

Global commodities traders are seeking new places in Asia to store billions of dollars worth of metals in a bid to drive down costs — a trend that also helps reduce scrutiny of their positions in the market.


Traders who normally make money as middlemen shipping commodities around the world are increasingly shifting their metals holdings from London Metal Exchange-approved warehouses to cheaper, less well-documented locations, analysts say.


The traders’ main aim is to reduce storage costs, a big chunk of their expenses. Warehouses in places such as Malaysia, South Korea and Singapore typically charge storage rates that are as low as one-tenth of those levied by official LME warehouses.


But while the LME publishes daily data about stock levels in its warehouses, little is certain about the size of metal stockpiles held outside its network.


Robin Bhar, head of metals research at Société Générale CIB, said non-LME warehouses are usually less regulated, while metal stocks stored in them are “less visible” to other market participants, creating the impression that supply-and-demand balances for some metals are tighter than in reality.


“You (metals traders) are, therefore, in a position to influence prices,” Mr Bhar said. He said traders could, for example, suddenly flood the markets with metals previously held in non-LME warehouses, having first ­positioned themselves for a downward turn in prices.


“I suspect it is to shield people from scrutiny” of sizeable market positions, Mr Bhar said.


While it isn’t known for certain which commodities traders are primarily responsible for shifting metals to non-LME warehouses, analysts say there have been several examples of stock flows out of LME warehouses in recent months that can’t be explained by actual demand dynamics. Stock movements from LME warehouses are typically heralded by their owners cancelling warrants over metals. A warrant is a document of possession for metal held within a warehouse approved by the LME.


Zinc was boosted by a 91,400 tonne LME warrant cancellation on February 11 and further large cancellations on March 12 and 23, helping push its price to an eight-month high in early May. That is despite a continued slowdown in the growth of ­Chinese steel production, one of the main uses for zinc.


Zinc’s price has dipped this month, due in part to the dollar’s strength — and in part because of a sudden delivery last week of just over 36,000 tonnes of zinc back into an LME-approved warehouse in Johor, Malaysia, according to analysts at Commerzbank. Lead prices, meanwhile, rose to a year-to-date high of $2162.50 a tonne on May 5 following an unusually large warrant cancellation of 97,875 tonnes on March 23.


Feedback from market participants suggests that lead stocks are mostly being moved to an off-market warehouse in South East Asia for a trading or a financial advantage rather than to meet physical demand, which has been weak in key markets such as China and India, said Farid Ahmed, principal analyst for lead markets at Wood Mackenzie. “It appears someone is trying to get ahead of the game,” he said.


The London Metal Exchange said in an email that it was “unable to speculate on why warrant holders may wish to cancel their warrants, but it is a sign of a healthy physical market to see metal regularly delivered in and out of storage.”


The LME said it had warned that higher outflows of stocks from its warehouses to off-LME storage could create “potential difficulties for the market in respect of stock visibility, premium price discovery and hedging.”


The exchange had introduced rules, effective from February 1, to force its warehouses with delivery backlogs lasting longer than 50 days to ship metal quicker. The rules were designed to cut delivery logjams in aluminium, but they also apply to other metals.


“There have been signs of a pick-up in physical consumption in China since the end of the first quarter but nothing to suggest that stocks need to be drawn down on this scale,” said Caroline Bain, senior commodities analyst with Capital Economics.

Other News and Announcements
[Bulgaria]
Posted on : Oct 05, 2017
Bulgarian lead-acid battery maker Monbat bought Italian lead battery recycler Piombifera Italiana in September. Piombifera Italiana, the third largest recycling fi....
[United States]
Posted on : Sep 27, 2017
Lead battery recycler Aqua Metals confirmed in an 8K filing to the US Securities and Exchange Commission on September 27 that meetings had begun with Johnson Controls to begin converting one of JCI’s f....
[Malaysia]
Posted on : Sep 21, 2017
Herbert Giess, a leading lead battery expert with 50 years experience, has been recognised for his exceptional contributions to the lead and lead-acid battery industries through a lifetime of cutting-edge re....
[United Kingdom]
Posted on : May 25, 2016
The lead-acid battery industry likes to push the PR line that it is one of the most recycled products on the planet at around 96%— but the battery’s reusable material currently sits at ar....
[United States]
Posted on : May 25, 2016
Electrochemical lead recycling firm Aqua Metals was named the winner of the Rising Star category in the 2016 Platts Global Metals Awards program. Aqua Metals was recognised for its AquaRefining proce....
Read More
Advertisements