A series of public and private meetings between the London Metal Exchange and its staunchest critics in the United States has revealed a small but significant shift in a years-long crisis over the exchange's warehousing policy, sources said.
After a sweeping overhaul of the LME's warehousing policy, new chief executive Garry Jones held three townhall meetings last month with US metal users, a rare public relations tour meant to heal wounds and described by one New York participant as "group therapy" after years of acrimony.
The cordial tone of the meetings in Atlanta, New York and Chicago suggested the exchange might have mollified many of its most outspoken foes, said sources who attended the meetings.
To be sure, it is not because consumers are happy. An unprecedented surge in aluminium premiums to record highs this year reignited concerns over the market, which many still view as distorted by excessive stockpiling.
But there is a growing recognition that the LME may have reached the limit of what it can do. Some were now renewing a push for US regulators and politicians to take up the fight for even tougher oversight of the world's oldest and biggest metals market and its warehousing network, sources said.
"I can't see a scenario where regulators can justify this. If the LME can't do anything else, the regulators can," said a source familiar with the Chicago meeting.
The LME, which is owned by Hong Kong Exchanges and Clearing, is regulated by Britain's Financial Conduct Authority, but the Commodity Futures Trading Commission has jurisdiction over its US business.
Big consumers have complained that the LME's warehousing policy has allowed warehouse operators owned by banks and merchants to create logjams, distorting supplies and inflating physical prices for the past four years.
Facing intense political and regulatory attention, the exchange announced in November last year an unprecedented overhaul of its storage rules, which will go into effect next month and force warehouses to deliver metal out at the fastest pace in the LME's 137-year history.
The US tour was aimed at explaining how the new rules link the rate at which storage firms deliver metal out with the level of inflows, which will shrink wait times in five key locations in Europe, Asia and the US, where backlogs range between 200 days and 11/2 years.
For some, the detente may only reflect a temporary lull until the rules come into force.
"The market can only really pass judgment once the rules come into effect," said a participant at the New York meeting.
The LME executives fielded questions at each meeting about whether the rule change went far enough, but they told participants bigger changes would have caused even greater disruption.
So some US participants are pinning their hopes on the commodity commission continuing to lead the charge ahead of its British and European peers.