The London Metal Exchange (LME) has announced the addition of Jeddah, Saudi Arabia, as a new delivery location for copper and zinc, marking the first new listing since Amsterdam in 2018. This expansion is set to take effect three months after the approval of the first warehouse. Additionally, the LME is exploring the inclusion of Hong Kong in its delivery network, leveraging its owner, Hong Kong Exchanges and Clearing (HKEx), to overcome past challenges with Chinese authorities regarding LME warehouses. Despite these expansions, the LME’s warehouse network faces ongoing issues. A notable concern is the long queue to load aluminum at Malaysia’s Port Klang, which reached 253 days at the end of June—the longest wait time since November 2016. The storage business remains highly concentrated, with four dominant operators facing uncertain futures.
As of June, the total registered storage capacity of the LME was 3.3 million square meters, down from 4.3 million three years ago. However, the pace of shrinkage has slowed, and the number of registered warehouses increased by 15 units to 468 after reaching a multi-year low in June 2023. Stocks at LME warehouses have risen to 2.3 million metric tons as of May, with notable accumulations of Russian aluminum in South Korea’s Gwangyang and non-Russian aluminum in Port Klang. Singapore has also seen significant inflows of lead and zinc. These locations have bucked the trend of declining storage capacity, with ISTIM UK Ltd. adding 11 warehouse units at Port Klang.
Rent-sharing arrangements have driven this year’s large metal deliveries into the LME system, where entities that warrant metal can earn a portion of future rental revenue. However, buyers seeking to move their metal must physically transfer it to another warehouse operator, creating potential queues. ISTIM has become a dominant force in the LME delivery system, storing 55% of all warranted LME stocks at the end of June. Other major players include Access World, C. Steinweg, and the Pacorini Group, which collectively store 92% of the total inventory. These four operators account for 344 of the 468 globally listed units.
The concentration of warehouse operators mirrors past trends, such as Metro International’s queue model in Detroit and Access World’s operations in Vlissingen, Netherlands. Despite reforms, smaller operators continue to struggle, with the number of LME-registered warehouse operators decreasing from 36 to 25 over the past five years. Access World’s uncertain status underscores the challenges of concentrated LME stocks. Glencore initially sold the company to Global Capital Merchants (GCM) in 2022, but Access World is back on the market after the buyers failed to complete the payment. At the end of June, Access World warehouses held nearly 12% of LME on-warrant stocks.
The LME has implemented numerous reforms to improve its delivery system, enhancing transparency with daily registered stocks reports and monthly updates on off-warrant stocks, queue lengths, and warehouse operator inventories. Despite these efforts, queues remain a persistent issue, and the market continues to be dominated by a limited number of operators. The addition of new delivery locations like Jeddah and potentially Hong Kong offers opportunities for network expansion, but challenges such as long queue times and operator concentration persist. The effectiveness of the LME’s decade-long reforms in enhancing delivery efficiency remains a topic of debate. 
