LME to raise rental charges to offset the fast load-out rates

London Metal Exchange registered warehouses will be raising the average rental rates by 3.6% in 2015 which is double the increase of previous year and will help offset the impact of the fast clearing warehouse loud-out queues.

LME warehouse owners had gained a lot of revenues by allowing long queues to form for the buyers looking for LME futures contract where some buyers had to wait more than a year.

In a bid to rectify the long waiting times, LME had announced plans for reforming the system that enabled the linking load-in to load-out rates and assured that waiting times would not exceed more than 50 days.

The system has taken effect and as a result a significant cut in the queues can be noticed but that has cut into the rental revenues of warehouse owners including global trade houses.

Much higher rents could have offset the impact of the reforms, but previous hikes helped prompt legal action by industrial users of the LME, pressure from the LME itself, and scrutiny by regulators. This has prompted warehouse owners to raise the average rental charges by 3.5% starting April 1, calculated against the size of the stocks. Last year the percentage rise was similar with a 3% hike while in 2012, there was a 7% increase in average rental.