London Metal Exchange to appeal against warehouse ruling
By Eric Onstad
LONDON (Reuters) - The London Metal Exchange (LME) has decided to appeal against a court ruling that halted a reform aimed at cutting backlogs at its global warehouse network.
A successful appeal could allow the exchange to carry through planned rules aimed at slashing waiting times of up to two years for industrial companies to gain access to metal stored in LME-approved warehouses.
"We welcome the opportunity to challenge the decision of the judge at the first instance at a hearing scheduled to take place on 29-30 July 2014," an LME statement said on Wednesday.
The exchange, owned by Hong Kong Exchanges and Clearing Ltd <0388.HK>, got permission to appeal on May 15, but had not said until Wednesday whether it would go through with an appeal or restart its consultation process.
The LME, the world's oldest and biggest market for industrial metals, was jolted in March when a judge ruled in favour of Russian aluminium producer Rusal <0486.HK>, saying consultations had been "unfair and unlawful".
But Lord Justice Jackson of the UK Court of Appeal said in a ruling last month giving the LME permission to seek to overturn the original decision: "In my view the grounds of appeal have a real prospect of success."
Loss-making Rusal filed its court action late last year to stop the reforms, due to have taken effect in April, because it was worried that they would further pressure aluminium prices.
RUSAL UNHAPPY WITH APPEAL
"The company regrets that the LME has decided to pursue further legal proceedings, rather than to acknowledge and correct the specific deficiencies identified in the judgment," Rusal said in a statement on Wednesday.
"Rusal looks forward to addressing its concerns to the Court of Appeal, which it is confident will agree with its position and will uphold the decision.”
The LME oversees warehouses where companies that buy metals such as aluminium or copper on its futures market can take delivery of quality-assured supplies if needed.
Big banks and traders that own the warehouses and charge rent have profited from letting long queues build up for buyers to withdraw metal. Some also keep huge stocks of aluminium tied up, unavailable to manufacturers, in long-term financing deals.
The backlog has kept the cost high for obtaining physical aluminium, even though the world is awash with supply. In a bid to appease industrial consumers, the LME moved last year to implement reforms that would cut the queues to a maximum of 50 days.
(Reporting by Eric Onstad; Editing by Erica Billingham and Susan Thomas)
