Glencore plans large LME lead withdrawals after stocks surge

Commodity trader Glencore plans to withdraw 30,000 metric tons of lead from London Metal Exchange warehouses, two industry sources said, after inventories of the battery metal ballooned to record highs.

Fellow trader Hartree Partners also earmarked metal for delivery out of a warehouse, by cancelling lead stocks, one of the sources and two other sources also familiar with the matter said. They did not say exactly how much lead Hartree had cancelled.

Such withdrawals create an impression of physical demand for lead, when the metal may simply be shifting between warehouses or traders rather than reaching real end-users. This matters for a market that relies on LME stock data to gauge market conditions.

Since last Thursday, 46,100 tons of LME lead warrants – title documents conferring ownership – have been cancelled, taking the total to 65,225 tons or 14% of total stocks. All but 1,725 tons of the cancelled stock is in Singapore.

The sources did not know why London-listed Glencore and US-based Hartree had cancelled the warrants, but said they may supply the lead to physical customers or shift it to another warehouse for lucrative so-called rent deals.

Glencore declined to comment and Hartree did not respond to requests for comment.

The cancellations were made after rival trading house Trafigura delivered more than 160,000 tons of lead into Singapore on two consecutive days earlier this month for a rent deal, taking LME lead stocks to their highest since 1970, according to Reuters records.

Trafigura declined to comment.

Two of the sources said it would, however, be unusual for Glencore or Hartree to get involved with rent deals.

Companies that deliver for rent deals do not have to retain ownership of the metal but receive a share of the rent, paid by the new owners, for as long as it remains in that warehouse.

Singapore is attractive for rent deals partly because the high cost of cancelling warrants, loading out the metal and shipping it to consumers there can deter withdrawals, allowing warehouses and the traders that delivered the metal to keep earning money.

Daily LME rent in Singapore for lead is 51 cents a ton. Storing 30,000 tons there would earn $15,300 a day or more than $5 million a year.

(By Pratima Desai and Tom Daly; Editing by Kirsten Donovan)