LONDON (Reuters) – Investment fund Cobalt 27 boasts on its website that it holds 2,904.7 tonnes of physical cobalt “fully insured and stored in LME-certified warehouses in Europe and the U.S.” Which is curious because the London Metal Exchange (LME) reports only 840 tonnes of cobalt sitting in its entire global warehouse network.
That, however, is metal that has been placed on warrant with the exchange. What Cobalt 27 owns is not on warrant. It could be warranted overnight. It is, after all, already sitting in one of the LME’s 559 registered warehouses.
But because it hasn’t been warranted, it doesn’t get counted as part of the LME’s daily inventory reports. And because it hasn’t been warranted, it’s also subject to a much lower storage charge. Which is, of course, one of the main reasons it hasn’t been warranted.
Welcome to the world of shadow LME warehousing, the latest chapter in the exchange’s long-running storage saga. LME stocks of all metals have fallen from over 7 million tonnes in 2013 to 1.7 million at the end of June.
Much of this has been down to the erosion of aluminium load-out queues at LME warehouses in Detroit and the Dutch port of Vlissingen. LME rule changes have accelerated the process.
The number of registered LME warehouse units had been falling in tandem with stocks, which is logical since warehouse operators don’t make money by running empty sheds.
For the rest of this column: https://uk.reuters.com/article/uk-lme-warehousing-ahome/column-why-london-metal-exchange-warehouses-thrive-in-the-shadows-idUKKCN1UL1OG