The London Metal Exchange has been forced put on hold a new rule to tackle the long warehouse queues that US politicians and aluminium buyers blame for increasing the price of everything from drink cans to car bodies.
Queues of more than 500 days to take delivery of aluminium from LME warehouses became the focus of a furious debate last year, triggering a series of complaints by metal users, criticism by senators and investigations by US regulators.
MillerCoors, the brewer, claimed at a Senate hearing that the logjams at LME-registered warehouses owned by Goldman Sachs, Glencore Xstrata and other companies inflated global aluminium costs by billions of dollars – allegations that were fiercely disputed.
Warehouse owners profit from long queues because they earn rent. Owners of the metal also gain, by taking advantage of the aluminium market “contango”, where prices for future delivery exceed current prices, enabling them to sell the metal forward for a small but safe profit.
In an attempt to tackle the logjam, the LME in November announced a new rule that would oblige warehouses with queues longer than 50 days to load more metal out than they bring in.
But the plans, due to take effect at the start of April, were thrown into disarray on Thursday when a UK court said the consultation procedure was “unfair and unlawful”, and set the rule aside.