LME imposes new restrictions on holders of large positions

[LONDON] The London Metal Exchange (LME) has imposed new restrictions on holders of large positions in nearby contracts amid low inventory levels, it said on Friday (Jun 20).

LME took action after premiums for nearby copper contracts jumped to their highest levels since October 2022.

The exchange, the world’s oldest and largest market for industrial metals, said it has been monitoring large positions in recent months and in some cases, had to take action.

“At times, the LME’s Special Committee has directed market participants to take a number of actions to reduce large on-exchange positions relative to prevailing stock levels,” the LME said.

“Given the ongoing low stock environment, the Special Committee now feels it appropriate to introduce … transparent and generally applicable set of requirements.”

The action was taken to head off the development of a potential “corner” on the market or an “undesirable situation”, it added.

The new rule expands the LME’s existing restrictions on so-called “tom-next” positions that are closer to delivery, it added.

The restriction requires holders of long positions which are greater than the total stocks levels to lend back to the market at a zero premium.

In copper, the premium for the cash contract over the three-month forward is trading at US$180 a tonne from a US$3 premium only a month ago.

LME data shows there is one company holding a dominant position of more than 90 per cent copper warrants and cash contracts and two companies holding 50 to 79 per cent.

Warrants are title documents conferring ownership of metal.

Copper stocks in LME registered warehouses at 99,200 tonnes have dropped more than 60 per cent since the middle of February and are at their lowest since August 2023.

The LME is owned by Hong Kong Exchanges and Clearing. REUTERS