Singapore has become a critical hub for refined zinc and lead stockpiles, with inventories in the city-state’s London Metal Exchange (LME) registered warehouses soaring more than tenfold since May 2023. Recent data shows that nearly 430,000 tons of these base metals are now stored in Singapore, making it a key vault for major trading companies like Trafigura Group and Glencore Plc.
The increase in stockpiles is partly due to a global economic slowdown, with China’s weakened demand playing a significant role. According to Jia Zheng, head of trading at Shanghai Soochow Jiuying Investment Management Co., traders are waiting for a recovery in Chinese demand to redirect these supplies to the world’s largest market.
However, the surge in inventories isn’t solely driven by sluggish demand. Singapore has long been a strategic distribution center for base metals, benefiting from its established infrastructure and proximity to key markets. Despite high storage costs, traders are leveraging “rent sharing” agreements with warehouse operators, allowing them to offset these expenses by sharing storage fees. This strategy has attracted significant metal deposits to Singapore, even as cheaper storage options are available in neighboring countries like Malaysia and South Korea.
These rent-sharing deals, although profitable for traders, pose risks for warehouse operators. If traders relocate their metals to other facilities offering better incentives, warehouse operators could face substantial financial losses, as they are left without a client to recoup the costs of the shared rents and financial incentives offered.
The buildup of metals in Singapore also has the potential to impact global prices by making a portion of the world’s supply less accessible to markets outside of Asia. Despite the risks and costs, Singapore remains an attractive hub due to its strategic location, established trading networks, and the liquidity it offers, both financially and logistically.
As the global outlook for metal demand remains uncertain, Singapore’s role as a metal storage hub continues to be crucial for traders, even as the dynamics of the market evolve. 
