09 OCTOBER 2015<a href= "http://www.reuters.com/article/2015/10/08/lme-aluminium-warehouses-idUSL8N1281M620151008" target='_blank'> Reuters </a>
LME signs up 9 warehouse firms for new aluminium premium contracts
Edited by : AL CIRCLE
2 min read
The London Metal Exchange has signed up nine warehouse for its new aluminium premium contracts due to be launched in November, a crucial step towards ensuring their acceptance and use. Warehouse companies that will get involved in the premium contracts include Henry Bath, majority-owned by China's CMST Development, and Pacorini, the exchange said in a statement.
The new contracts - one each for the United States, Northern Europe, East Asia and South East Asia - need warehouses to create warrants which can be traded by consumers and producers and other market participants such as funds.
Warrants are legal ownership documents for metal stored in LME warehouses. Premiums are paid over the LME cash price to cover the cost of freight and insurance, and reflect regional demand and supply. Getting the warehouses on board is important as one of the worries about the new contracts was there would not be enough warehouses to make them viable.
This latest development comes after the exchange in August confirmed plans to waive fees for its new aluminium premium and steel contracts from the launch on Nov. 23 to Dec. 31, a move it hopes will help boost volumes and liquidity.
Fee incentives and the confirmed participation of the warehouses should make it easier for the exchange to sign up market makers for the new contracts. The deadline for market maker applications has been extended to Nov. 13.
The new contracts were a response to record higher aluminium premiums, partly caused by long queues at LME-approved warehouses in Detroit and the Dutch port of Vlissingen.
The new contracts - one each for the United States, Northern Europe, East Asia and South East Asia - need warehouses to create warrants which can be traded by consumers and producers and other market participants such as funds.
Warrants are legal ownership documents for metal stored in LME warehouses. Premiums are paid over the LME cash price to cover the cost of freight and insurance, and reflect regional demand and supply. Getting the warehouses on board is important as one of the worries about the new contracts was there would not be enough warehouses to make them viable.
This latest development comes after the exchange in August confirmed plans to waive fees for its new aluminium premium and steel contracts from the launch on Nov. 23 to Dec. 31, a move it hopes will help boost volumes and liquidity.
Fee incentives and the confirmed participation of the warehouses should make it easier for the exchange to sign up market makers for the new contracts. The deadline for market maker applications has been extended to Nov. 13.
The new contracts were a response to record higher aluminium premiums, partly caused by long queues at LME-approved warehouses in Detroit and the Dutch port of Vlissingen.
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