In a physically settled futures market, you have a long who wants delivery and has duly put up the cash for his position. But the other party, the short, cannot, or doesn't wish to make delivery.. What does the exchange do SPECIFICALLY...?? Do the provisions of the contract allow the exchange to settle with the long in cash???
Read each exchange's rulebook to see how defaults are handled. Exchanges normally force shorts to cover and allow no new longs in the delivery month when there is a shortage of the underlying commodity. A force majeure situation would lead to negotiated cash settlements.
"Shorts" who fail to make good delivery get fined a lot of money per contract, per day that goes by before delivery is completed. A "good" clearing firm would never let a customer get into that type of situation.
Some of the rule books imply that you could be "settled" in the equivalent in something else e.g. you bought a future in X....but are "settled" with Y. Sounds to me like you are talking about either gold or silver. Are you hearing/reading of rumors of defaults in delivery for December? I have read them, but can offer no knowledge of the validity of the rumors. Caveat emptor - anybody trying to trade gold and silver futures based upon my miniscule knowledge of the internals of the gold and silver futures would be SORELY mistaken! -gastropod