Base Metals Warehousing

CME Group offers physically delivered base metals contracts including Copper, Aluminum, Zinc and Lead. For each of these products, a network of Exchange-approved warehouses is available for the delivery and storage of the metals. As an Exchange-approved warehouse, the facility must comply with various requirements and obligations as prescribed by the rules and regulations of the Exchange.

It is the responsibility of the warehouse to determine the eligibility of the metal in its inventory. Eligible metal is that which meets the contract specifications of the product. The specifications of the CME Group physically delivered copper and aluminum products are detailed in the table below.

Source: CME Group

When metal is delivered into a warehouse and is determined to be eligible, storage for that metal is paid to the warehouse directly by the owner of the metal. A customer may decide to warrant (register) the metal, usually for the purpose to use for delivery against an Exchange futures contract. 

The warehouse is responsible for warranting the metal. If a warehouse is directed to warrant the eligible metal, it creates an electronic warrant through an Exchange-based system, Deliveries Plus (“DPLUS”) to register the metal. The warrant, which is in the name of the customer’s clearing member, contains pertinent information with respect to the metal that is being registered including the brand, weight, serial number and warehouse identification. A warrant can only be created or cancelled by the warehouse. 

Once the metal is on warrant, storage is then assessed and paid through the Exchange’s DPlus system. At the end of the month, CME Clearing assesses the registered metal. Clearing, through DPlus, debits the account of the clearing member on behalf of the customer for the storage charge for the following month and pays directly to the warehouse. If the warrant is transferred, the previous owner’s account is reimbursed for prepaid storage fees and the new owner’s account is debited. 

For Copper only, handling charges are paid upon warranting, whereas for the other metals, handling charges are paid upon cancellation for load out. If the Copper warrant is transferred, the handling charge is reimbursed to the seller and debited from the buyer.

If metal is requested to be loaded out of a warehouse, the customer must instruct the clearing firm to request a Cancel for Load Out (CLO) in DPlus. The customer is responsible for scheduling and coordinating transportation and must have all charges paid prior to release of the metal from the warehouse. 

Each metal has a specific minimum load out rate that the warehouse is obligated to meet on a daily basis and conveyance requirements. For Copper, it is required that the warehouse has both direct truck and rail access. The minimum daily load out rate for Copper is 500 short tons per day, combination of truck and rail. For Aluminum, the Warehouse must have direct truck and/or rail access and must meet the minimum load out requirement for the primary conveyance it has chosen. For Aluminum, the minimum daily load out requirement is 2% of total inventory with a minimum daily rate of 1,000 metric tons by primary conveyance. 

Each warehouse must report to the Exchange an inventory of the eligible and registered metal it has in store each day. For base metals, these figures are reported for each location showing the movement of metal into and out of the warehouses as well as metal that has moved between the eligible and registered status as depicted in an inventory report publicly available on the CME Group website. 

In addition to providing transparency in providing the daily inventory of metal in each warehouse location, a warrant line up report is also publicly available to show the schedule of shipments from the individual warehouses. This report provides additional color to the inventory report as it identifies the specific warehouse and its current shipment schedule which is valuable information for the market users involved in physical delivery.

• COMEX warehousing is based on a transparent monthly storage charge structure.
• The storage rates are established by each Exchange approved warehouse subject to the approval of the Exchange. The rates are listed on the CME Group website and represent the maximum fees that can be charged by the warehouse. These rates may be substantially lower than the storage rates at other exchange-registered warehouses.
• COMEX does not generate any revenue from the storage fees paid to the Exchange-approved warehouses.
• Load out rates and rules and facility capacities are based on each individual warehouse, not the location.
• Warehouses are closely and consistently monitored by the Exchange for compliance with rules and adherence to obligations to maintain efficient storage and handling of metal deliverable against the Exchange’s metals contracts.
• For Aluminum, both indoor and outdoor storage space are available.

Storage fees, warehouses and capacity, brands, conveyance capabilities

Minimum load out requirements

Daily inventory reports and warrant line up

There is a warehouse network for each of the physically delivered base metals and, in many cases, the warehouse is approved for more than one metal. Copper is a duty paid contract which means that any duties or taxes associated with the storage or movement of the metal must be satisfied prior to the metal being delivered into the warehouse. Warehouse locations for Copper must be in the United States. For Aluminum, a warehouse can be located in the U.S., Europe or Asia and must be in a Free Trade Zone. The Aluminum futures contract is duty unpaid and, once moved outside of the Free Trade Zone locations, any duties associated with the metal must be paid. For Aluminum, it is required that warehouses designate both indoor and outdoor storage space. The current locations of the Exchange-approved warehouses for Copper Futures and Aluminum Futures are shown in the table below.