The London Metal Exchange has proposed changes to its warehouse network aimed at reducing long waits for aluminum, copper and other metals that have sparked complaints from industrial consumers.

Updated July 1, 2013, 7:59 p.m. ET

LME Aims to Ease Metals Gridlock

The London Metal Exchange has proposed changes to its warehouse network aimed at reducing long waits for aluminum, copper and other metals that have sparked complaints from industrial consumers.

Since 2011, companies that use metal to make everything from wires to pipes to beer cans have complained that bottlenecks at warehouses licensed by LME—but owned by banks and commodities-trading firms—have driven up their costs..The LME, which sets the rules for warehouses that are widely viewed as the world’s main reserve supply of metal, said Monday it wants to require facilities experiencing logjams to release more metal than they take in. Implementation could begin in April 2014.

Warehouse stockpiles have swelled since the financial crisis, with commodities traders taking advantage of cheap financing to steer metal into their facilities. In previous attempts to flush out the metal, the LME raised the minimum amount warehouses had to deliver to customers. Owners sidestepped those rules by paying above the market rate to bring in even more supply.

The latest change has the potential to break traders’ stranglehold by tying the amount leaving a warehouse to the amount coming in, analysts say.Barclays BARC.LN +2.17% analyst Gayle Berry said the proposed change should end the practice of storing ever-increasing amounts of metal at a few choke points, which in turn would reduce wait times for delivery.

Coca-Cola Co., KO +0.87% aluminum products giant Novelis Inc., U.S. copper-wire makers Southwire Co. and Encore Wire Corp., WIRE +1.09% and trade groups representing U.S. beer makers and European steel mills have raised concerns in the past about the LME’s warehousing system.

“I am relieved to see that the LME is finally recognizing that the steps they have taken so far to address the warehousing issue have been entirely inadequate,” said Nick Madden, senior vice president at Novelis.

However, Mr. Madden and other critics of the warehouse system said they hoped the rule could be implemented before April.

“According to the LME’s timing, it would take almost another year before their proposal would really impact the market. This means another year of supply-chain risk and inflated premiums,” Mr. Madden said.

The LME is soliciting feedback through September, and the exchange’s board is slated to vote on the proposal and any potential changes in October.

Currently, the wait to retrieve metal is longer than 100 days in five cities: Johor, Malaysia, Antwerp, Belgium, Vlissingen, the Netherlands, New Orleans, and Detroit. In Detroit, the wait for aluminum stands at more than 460 days, according to LME data.

Representatives of the largest warehouse owners in those cities—J.P. Morgan Chase JPM -0.57% & Co.,Goldman Sachs Group Inc., GS +0.33%Trafigura Beheer BV, and Glencore Xstrata PLC—declined to comment.

At a news conference on Monday, Matt Chamberlain, LME head of strategy and implementation, said the long waits are becoming “a threat to the LME as a traditional destination of last resort for buyers.”

The LME defended how it ran its warehouse system as recently as April. “I am not going to apologize for this,” Martin Abbott, LME’s chief executive, said at a copper conference in Chile.

“It is the role of the LME to reflect the macro economy, and the reality of the economy right now is a surplus of some metals and low interest rates” that make metal attractive for banks and other financial institutions, Mr. Abbott said.

Mr. Abbott said in June he would resign at the end of the year. LME Chief Operating Officer Diarmuid O’Hegarty said Mr. Abbott, a member of the LME board, backs the latest proposals.

The LME also faced pressure to change its rules from Hong Kong Exchanges & Clearing Ltd., which bought the formerly member-owned exchange last year for $2.2 billion. Hong Kong Exchanges’ chief executive, Charles Li, said last year that it would be “unacceptable” if the LME’s rules were making the real economy suffer, pledging to level a “bazooka” at the problem if that was the case.

In a blog post on Monday, Mr. Li said the LME could have acted more decisively years ago to address the warehousing issue.