Citigroup faces $5 million bill to transport its lead from Singapore, sources say

By Pratima Desai

LONDON, Dec 2 – Citigroup will move most of its lead stocks from Singapore to Malaysia or Taiwan at an estimated cost of $5 million due to limited storage space and a lack of lucrative rent deals, three sources said, three sources familiar with the matter said.

The U.S. bank’s lead was stored with Grafton Logistic Services under a rent deal, but after commodity trader Trafigura bought the warehousing company Citi decided to withdraw its stocks of the battery metal and look for rent deals elsewhere.

Under lucrative rent deals, London Metal Exchange approved warehouses share rental income with companies that deliver metal to them.

On October 9, Citi cancelled or earmarked for delivery nearly 112,000 metric tons of lead in London Metal Exchange approved warehouses in Singapore, the sources said. As of November 28 more than 90,000 tons of the battery metal had left LME storage facilities in Singapore.

Citi plans to keep about 24,000 tons in Singapore, while 88,000 tons will likely go to Taiwan or Malaysia, two sources familiar with the matter said. Citi declined to comment.

Citi declined to comment.

Shipping costs include freight, handling and LME warehouse fees for loading the metal onto a truck known as free-on-truck. Companies that take delivery of metal pay FOT while those putting metal into storage receive FOT.

Taking metal from LME storage facilities in Singapore will cost Citi S$68.50 or about $53 a ton while delivering to warehouses in Malaysia would earn the bank 162.50 ringgit or around $39 a ton. FOT for Taiwan is T$1,455 or about $46.

Shipping is estimated at $50 a ton for Taiwan and $40 for Malaysia, the sources said, bringing the total cost for 88,000 tons close to $5 million.

Citi traders have in previously used rent agreements for aluminium and zinc in LME warehouses.

Companies that deliver metal do not have to retain ownership but they get a share of the rent as long as the metal stays in the warehouse. Fees are paid by the new owners of the metal.

(Reporting by Pratima Desai; Editing by Louise Heavens)