Former Metro International Trade Services owner set for return to LME network

Bill Whelan, the Michigan-based mastermind behind the creation and sale of one of the world's biggest metals warehousing firms, is making a comeback, seeking to rejoin the London Metal Exchange network as new rules roil the storage business.

Three years after leading the sale of Detroit-based Metro International Trade Services to Goldman Sachs Group Inc for some $550 million, Whelan has applied for LME approval to store aluminium and other base metals at his warehouse and distribution company WF Whelan Co in Detroit, he says.

He expects to get the go-ahead in the next month or so after completing a 1,200-foot rail spur that links his warehouses to the rail network that transports raw materials and automotive products across the Midwest, he said. Rail access is required for LME approval.

The return of Whelan, who is renowned for having built Metro into the LME's biggest registered operator in less than two decades, is the latest sign that seismic changes to the LME's warehouse policy and intense political and regulatory oversight are spurring new interest in the industry.

"Warehousing will be more competitive" under the new rules, Whelan told Reuters. Warehousing companies earn money from rent paid by traders to store metal in sheds.

After years of complaints from end users about long delivery times and inflated physical prices, the LME announced new rules last month to speed up delivery rates, which market participants say will crimp big warehousing companies' profits.

Small, independent warehousing companies hope to carve out a niche in locations that have been dominated in recent years by large firms owned by banks and commodity merchants such as Goldman Sachs and Glencore Xstrata.

It was Goldman's 2010 purchase of Metro that kicked off a series of similar acquisitions by commodity merchants including Glencore, Trafigura and Noble Group Ltd's, sparking concerns among LME users about conflicts of interest between the owners, their metals traders and their warehouses.

Now, that trend is partly unwinding as U.S. banks beat a retreat amid intense regulatory and political scrutiny of commodities trading. Goldman is considering selling Metro, and JPMorgan Chase & Co has put its physical commodity business, including its warehousing unit Henry Bath, up for sale.

Other financial players from outside of the United States are moving in, including Brazilian investment bank BTG Pactual Commodities.

Once he gets approval, Whelan will be competing in Detroit with Metro, Pacorini, which is owned by Glencore and Noble's Worldwide Warehousing Services.

Metro still dominates in Detroit, operating 30 out of the 38 facilities approved by the exchange there. Almost 30 percent of the LME's 5.4 million tonnes of aluminium is stored there.

It is the third-largest company in the LME network which includes over 20 companies and 700 locations. The LME declined to comment on Whelan's application.