By Tom Daly and Pratima Desai
(Reuters) -Citigroup is planning to withdraw large amounts of lead from London Metal Exchange (LME) approved warehouses in Singapore, four industry sources said, as the bank seeks alternative rent-sharing deals.
Citi declined to comment.
The U.S. bank put a significant amount of lead on warrant – a title document conferring ownership – in LME warehouses in March this year specifically for rent deals or agreements that allow warehouses to share rental income or fees with companies that deliver metal to them.
Companies that deliver metal for rent deals do not have to retain ownership of the metal, but they get a share of the rent, paid by the new owners for as long as the metal stays in that warehouse. Daily rent for lead in the LME’s Singapore warehouses is 51 U.S. cents a ton.
As of Monday, Singapore held all but 2,000 metric tons of the 247,300 tons of refined lead – primarily used in lead-acid batteries for vehicles – stored in the LME system, exchange data show.
However, cancelled warrants – or metal earmarked for withdrawal from warehouses – in Singapore had shot up to 170,750 tons as of Friday from just 49,025 tons on October 9.
Cancelled warrants in Singapore account for nearly 70% of the total amount of lead stored in that LME location.
Three of the sources said Citi was aiming to move the metal out of warehousing firm Grafton’s facilities in Singapore, which were recently acquired by commodity trader Trafigura, a local registration document shows. The document did not give a date for when the transaction was completed.
Grafton and Trafigura declined to comment.
Two of the sources said Macquarie had also cancelled some LME lead warrants in Singapore.
Macquarie declined to comment.
The sources declined to be identified as they are not authorised to speak to the media.
(Reporting by Tom Daly and Pratima Desai; Editing by Louise Heavens)
