12 January 2023 – Many bonded warehouses, especially those for steel and stainless steel, are currently empty, according to sources. A good sign? The LME has to make improvements in many places after an independent report on the chaos from March 2022, while at the same time regulators continue to block Asian trading hours. And molybdenum remains very scarce and prices high.
Bonded warehouses are empty, not only in Southern Europe
We have been told by people in the know that bonded warehouses in Southern Europe are currently empty, especially for steel and stainless steel. This is probably a mirror image of what is currently prevailing in bonded warehouses in other regions, they added. Thus, the trend of emptying warehouses in Europe seems to continue. A positive sign for the steel and stainless steel market.
What are bonded warehouses?
Bonded warehouses are a secure storage facility where goods, such as commodities or finished products, are held while they are being imported or exported. These goods are stored under the control of Customs authorities and are not subject to import duties or taxes until they are removed from the warehouse for domestic consumption. Bonded warehouses are typically used for goods that are in transit or for goods that are temporarily being stored before being exported. They also play an important role in the storage and handling of goods in transit and for goods that are temporarily being stored before being exported.
LME publishes results of independent Nickel Review
The LME this week published the results of the independent nickel review of the events of 8 March 2022. At that time, the nickel price had shot to an all-time high of over $100,000 per tonne, whereupon the LME had intervened and halted trading and subsequently corrected it.
Call for urgent reforms
The report by Oliver Wyman, a management consulting firm based in the United States, urged urgent reforms at the London Metal Exchange in its independent review.
Expand the mandate of the LME’s risk and control functions to explicitly cover the prevention of market distortions and expand capacity accordingly.
- Strengthen LME rules and enforcement processes to prevent risks of market distortions
- Monitor significant risks in the OTC market to manage the risk of LME market distortions
- Improving volatility control to curb extreme price fluctuations
- Strengthen the operational readiness of the whole market to cope with extreme events
- Consider tightening rules to improve member and LME perceptions Clear resilience
- Develop a clear vision of how the LME will respond to events and restore liquidity
The LME has announced that it intends to implement necessary reforms by the end of the first quarter of 2023. Whether this can be achieved remains to be seen.
UK regulators block Asian trading hours
According to media reports, Britain’s Financial Conduct Authority (FCA) has informed the LME that it will continue to block the important Asian trading hours for the LME. The background to this is said to be that monitoring of the LME during night time cannot be adequately secured.
Another intervention or a data glitch?
Attentive observers will have noticed that the LME nickel price dropped by almost 5.5% after the close of trading yesterday (Wednesday) and started trading this Thursday morning with a significant upward correction. This raises the question of whether there has been another intervention or simply a data glitch? In any case, the official LME nickel 3-month closing price was $27,039 on 11 January 2023.
Molybdenum still scarce in EU
The high molybdenum prices continue to indicate the scarcity of the raw material in the EU. Especially for pure molybdenum products, such as ingots, prices have already gone up to $ 80,000 per tonne this week. But also for ferro-molybdenum and molybdenum oxides there has been little change.
The very strong demand for molybdenum products in China is keeping availability tight. Europe in particular is affected by this, as the raw material has to be imported almost exclusively. Molybdenum is needed in stainless steel grades 316 and 316L, among others, and has a significant influence on the price.
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