After copper chaos, LME mulls rules to keep from running out of metal
The London Metal Exchange is considering whether it should sometimes block traders from withdrawing inventory from its warehouses, in order to guard against running out of metal entirely.
Such a move would mark a significant shift in philosophy for the 144-year-old LME, which has long trumpeted its role as a 鈥渕arket of last resort鈥 — into which producers can deliver unwanted metal in times of glut, and to which consumers can turn for supplies in times of scarcity.
LME Chief Executive Officer Matthew Chamberlain told the Reuters Commodities Trading conference on Wednesday that he was 鈥減leased鈥 with the聽steps聽the exchange took last month after a spate of requests for copper led to聽fears聽that it could run out of the metal.
But he said that the LME would also look at taking further action.
鈥淕oing forwards there鈥檚 this fascinating policy question for the LME about, should our warehouses always be the market of last resort?鈥 Chamberlain said. 鈥淪hould it be the case that any LME trader can turn up to an LME warehouse and book out as much metal as they want, even if that could have a potentially disruptive effect on the market?鈥
Trafigura Group, the largest copper trader, played a key role in draining inventories in recent months, Bloomberg has聽reported. The trading house has said it withdrew metal from the LME to deliver to end users in Asia and Europe.
Chamberlain said that traders would always argue that they should be allowed to withdraw metal they own. But he added: 鈥淲hen that metal is in a regulated exchange, we have to consider the effect on the market, the effect on the pricing.鈥
(By Jack Farchy)
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