Citi delivers lead to LME warehouses for profitable rent deals

By Pratima Desai

LONDON (Reuters) - Significant amounts of lead have been deposited in London Metal Exchange (LME) approved warehouses by Citigroup for so-called rent-sharing deals over the past few days, three sources familiar with the matter said.

Rent deals are profitable agreements under which LME-registered warehouses share fees or rental income with companies that deliver metal to them.

It is not known exactly how much lead Citi delivered to LME warehouses. But LME data shows stocks of the battery material in Singapore jumped 15% or 27,250 metric tons in the four days to March 18 to 206,350 tons.

Citi declined to comment.

Much of the lead in warehouses in Singapore, amounting to 90% of the total in the LME's network around the world, is under rent deals, the sources said.

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

Rent for metal on LME warrant, a title document conferring ownership, is significantly higher than for metal in warehouses that is not on warrant.

LME warehouse daily rent for lead in Singapore is 51 U.S. cents a ton, which for 27,250 tons would amount to nearly $14,000 a day.

These deals are possible because companies are able to buy cheaper nearby lead contracts and sell higher priced contracts further along the maturity curve.

Specifically, the discount for the cash against the three-month lead contract rose above $40 a ton in February.

Part of the reason for the discount is surpluses, which analysts at Macquarie estimate at 76,000 tons this year, up from 55,000 tons in 2024.

(Reporting by Pratima Desai; editing by Kirsten Donovan)