By Andy Home

London

Load-out queues in the London Metal Exchange’s (LME) warehousing network fell across the board last month.

The backlog to remove aluminium from Detroit, the most acutely impacted location, shrank by 30 days to 641 days, while the wait to remove other metals stuck behind the wall of aluminium fell from 111 to 93 days.

The reduction in waiting times was even sharper at the Dutch port of Vlissingen, a drop from 637 to 555 days, according to the LME’s latest monthly report.

A “flash” queue to load out zinc at New Orleans, meanwhile, almost disappeared in November, dwindling to just 10 days from 71 days at the end of September.

All good news, it appears, for the LME, which has been lambasted by industrial users for its dysfunctional physical delivery system and its disputed part in fracturing the aluminium market’s pricing model. True, the problem can hardly be described as fixed given you’d still have to wait well over a year to get aluminium out of either Detroit or Vlissingen, but at least things are moving in the right direction even before the exchange’s new rules linking load-in to load-out rates (LILO) kick in from February.

However, the simple metrics of queue length mask a redrawing of the battle-lines in the LME’s ongoing campaign against its warehousing companies.

One in particular, Pacorini, the metal logistics arm of Glencore, is steadily increasing its dominance of the global LME storage system.

Its share of LME-registered metal, both on-warrant and awaiting departure, has grown from just under 50% in April to 54% in November. Even that figure, though, understates the influence Pacorini now has in terms of exchange stocks of aluminium, copper and zinc.

Metro, the LME warehousing operator owned by Goldman Sachs , took centre stage in the recent US Senate hearings on the impact of the load-out queue at its Detroit sheds on the aluminium price.

And the Detroit aluminium queue is still the longest, although any direct correlation with soaring physical premiums has, for now at least, broken down.

But Metro has been out of the queue-creation game for many months now. Its Detroit operations have received just 1,725 tonnes of aluminium since April. A total 537,000 tonnes have been loaded out over the same period. Goldman Sachs said in June it was voluntarily complying with the LME’s LILO rule, even while its enactment was held up in the UK legal system. Such good behaviour may also have something to do with ensuring operational stability during a sales process which is thought to be entering its final stages.

Recent fluctuations in the Detroit queue have been all about fresh cancellations of metal stored in Metro sheds. But that process is now also pretty much done. The amount of non-cancelled aluminium in Detroit is just 16,075 tonnes and it’s by no means certain all of that is in Metro anyway.

The pricing point has passed to Vlissingen, where Pacorini holds all but 900 tonnes of the total 1.9mn tonnes of LME-registered metal.

That shift in power is evident from the flurry of reverse cancellations at Vlissingen during the November aluminium squeeze.

The movement of 116,175 tonnes of metal back onto LME warrant is the main reason why the load-out queue at Vlissingen fell so sharply in November.

Unlike Detroit, open aluminium tonnage at the Dutch port is high at a current 704,425 tonnes.

Only Rotterdam holds more “live” aluminium but it is split across several different operators and a good part of it is thought to be locked down under rental agreements. As aluminium drains steadily from the LME system, the game is determined by the amount of free-float metal available through the clearing system and much of it, if not most of it, appears to be located at Vlissingen.

Also, unlike Metro Detroit, Pacorini Vlissingen has started loading in more aluminium in recent weeks. It received 76,950 tonnes last month and another 36,725 tonnes so far this month.

A one-off related to the spread stress of last month or a re-modelling of load-in and load-out rates before the February deadline? Only time will tell but it’s a disconcerting development from the LME’s perspective.

Metro’s foot-print in New Orleans has also been steadily diminishing.

That “flash” zinc queue in September resulted from the mass cancellation of stocks in Metro sheds. The company currently holds just 775 tonnes of non-cancelled tonnage of all LME metals in New Orleans.