Long load-out queues earlier this decade generated media scandal, a flurry of legal action and intense regulatory scrutiny of the exchange. The ensuing raft of reforms to its storage network appeared to have laid the issue to rest.
Not so. At the end of February, there was a 229-day queue to get aluminium out of warehouses in Malaysia’s Port Klang. That’s business days, not calendar.
Some of that metal is at the centre of a dispute between the warehouse operator, ISTIM, and trading powerhouse Glencore, which has lodged a complaint with the LME. The argument turns on the minutiae of the exchange’s labyrinthine warehouse rules but the underlying problem remains the same as ever.
ISTIM has built a dominant warehousing position in Port Klang which it is now leveraging to exact maximum revenue at the cost of exchange users.
This is a rerun of what caused the original queues first at Detroit and then the Dutch port of Vlissingen, where the aluminium load-out wait stretched as far as 774 days at one stage in 2014. Now as then, LME warehousing has moved from ancillary function to driver of the market.