LME warehouses see large deliveries of lead for lucrative rent deals
LONDON, July 23 (Reuters) -Large amounts of lead were delivered to London Metal Exchange (LME) approved warehouses in Singapore on Monday for profitable financial deals, taking total stocks of the battery metal to their highest since early May.
Industry sources say the lead deliveries are likely to be for so-called rent deals where LME-approved warehouses share fees with banks and commodity traders that deliver metal to them.
Companies that deliver metal for rent deals do not have to retain ownership of the metal, but can get a share of the rent, paid by the new owners, for as long as the metal stays in that warehouse.
Lead inventories jumped 44,475 metric tons on Monday to 253,550 tons MPBSTX-TOTAL, up 40% since June 4, daily LME data showed on Tuesday. A breakdown showed 45,725 tons were delivered to LME warehouses in Singapore and 1,250 tons were removed.
Rent for metal on LME warrant, a title document conferring ownership, is often five time higher than metal in storage that is not deliverable to LME warehouses.
LME warehouse daily rents average around 51 U.S. cents a ton, which for 45,725 tons would amount to more than $23,000 a day.
These deals are possible because companies are able to buy cheaper nearby lead contracts and sell higher priced contracts further along the maturity curve.
The discount for the cash against the three-month lead contract CMPB0-3 climbed above $60 a ton on July 11, the highest since early June. It was last around $42 a ton.
Reporting by Pratima Desai; editing by Alexander Smith
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