Reuters reported that banks and trading houses have found a way to beat the ravages of economic downturn, storing millions of tonnes of metal with a business model that outsmarts new rules put in place following widespread concern about their practices.

As of April 1 this year, new London Metal Exchange regulations mandate that warehouses which hold over 900,000 tonnes of metal must release a minimum 3,000 tonnes per day up from 1,500 previously.

According to an LME announcement in December, on that date, however, investment bank Goldman Sachs and commodity trader Glencore plan to hike rents for storing aluminum at their respective warehouses in Detroit and Vlissingen, Netherlands by around 10%.

Detroit and more recently Vlissingen have long incited anger from clients forced to pay daily rent for metal stuck in queues of around a year while the warehouses drip feed their stock out at the lowest possible rate.

The new rules were expected to dent queues. But with warehouses able to hike rents in response, it is little wonder players like JP Morgan want to expand their storage hubs in Rotterdam and Chicago.

A warehouse source said that from April you will see there will be a lot more coming out, this is now compulsory. The compensation for that is a very nice one because the outcharges and the rents are so much higher."

Mr Nic Brown analyst of Natixis said that "It seems as though the warehousing companies are saying to the LME if you want metal out more quickly you are damaging our business model and we'll have to take action to compensate for that."

Mr Chris Evans LME head of business development said that "When the discussions of the load out rate were underway last year we said that if we increase the rate there is likely to be an increase in costs and this is what we seeing now."

(Sourced from Reuters)