In recent days, the London Metal Exchange (LME) has dropped a sort of bomb among operators, threatening to suspend the warrants relating to its Malaysian warehouses, i.e. the instruments that give holders control of certain quantities of metal set aside in Johor and Port klang. This is no small feat, especially for those who work on the tin market: around 85% of LME stocks of this metal are in fact located in Malaysia.
It all stems from a move by the Malaysian authorities, who decided to impose a tax called GST (Goods and Service Tax) from 1 April, which could be extended to metal stocks. Indeed, the London Metal Exchange establishes as a pre-requisite for authorized warehouses that the stocks contained are not subject to local taxation. The conclusion of the story is not yet clear, because the warehouses could be excluded from the tax. However, some alarm is justified by the success of Johor and Port Klang as hubs of non-ferrous metals.
In the front row between the warehouses of the two sites is Pacorini Metals, the branch of the Trieste-based company which is today a division of Glencore, the Swiss mining and trading giant. In the Pacorini structures in Malaysia at the end of February there were a total of over 346 thousand tons of metals. Perhaps, as we said, everything could turn out to be a soap bubble. But fearing that this is not the case, many warrants have already been canceled and it cannot be excluded that caution leads to some movement of goods in extremis, to avoid unpleasant surprises.
