The move would be a boost for the world’s largest metals trading bourse, which has long aimed at creating a warehouse and logistics system for metals in China to better serve clients from the top market.
The LME has long wanted to establish a warehousing foothold inside mainland China, but has been rebuffed by Chinese regulators over concerns including competition with the Shanghai Futures Exchange. In Hong Kong, high property and labour costs have been a hurdle.
“Our mission is to get as close to the mainland as possible.” LME CEO Matthew Chamberlain said in a Bloomberg TV interview earlier Thursday. “Hong Kong is absolutely at the center of our plans for that bridge.”
In response to questions about warehouses in the mainland, Chamberlain said that was a decision for Beijing to take.
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“The ability to deliver into Hong Kong, to truck or to rail metal down here on the fantastic transport network, is something that we are really excited about,” Chamberlain told the seminar.
The Hong Kong Energy, Mining and Commodities Association, a local industry body that includes metals traders, said in a statement it has been in talks with the bourses to promote the city as a “good delivery point” to serve clients from the city and mainland China to throughout the Asia-Pacific region.
The association is collecting logistics and industry data for LME, it said. The exchange has already operates warehouses across Asia, including Singapore, South Korea, Malaysia, Japan and Taiwan.
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The LME has a large network of approved warehouses worldwide that at times hold millions of tons of metals from copper to aluminum and zinc. When Chinese users want to deliver metal to the exchange, their closest options are in South Korea, Taiwan or Malaysia.
A warehouse in Hong Kong would “strengthen the link between mainland physical metals markets, and international pricing on the LME will create more market arbitrage opportunities,” Chan told the seminar. China’s drive for a greener economy is likely to boost its demand for materials, and the city has the logistics infrastructure and trusted regulatory frameworks to make a warehouse work, she said.
