Hong Kong to join LME warehouse network to serve China’s appetite for metals

The London Metal Exchange (LME) on Monday added Hong Kong as one of its global warehouse locations to meet growing demand for the physical exchange of metals between mainland China and the rest of the world, while enhancing Hong Kong’s role as a conduit.

“The addition of Hong Kong to our global warehousing network is an exciting development, providing warehousing facilities closer to the metals hubs of mainland China than ever before,” said Matthew Chamberlain, CEO of LME.

Hong Kong will store LME-registered aluminium alloy, primary aluminium, copper, lead, nickel, tin and zinc, according to an official statement. The city will become an active location three months after the approval of the first warehouse company.

The move “represents a major milestone that brings China – the world’s biggest metals consumer – much closer to the most active global metals trading community, strengthening the links between the country’s physical metals markets and international pricing on LME”, said Bonnie Chan Yiting, CEO of bourse operator Hong Kong Exchanges and Clearing (HKEX).

LME has more than 465 warehouses in 32 locations worldwide, but it does not own or operate the facilities. Rather, it authorises warehouse companies and the warehouses they operate to store LME-registered brands of metal on behalf of warrant holders. LME has been eyeing China as a warehouse location since as early as 2012, when HKEX bought the LME for US$2.2 billion.

“Mainland China is the world’s largest consumer of metals, and with its outstanding commercial infrastructure, Hong Kong provides the natural hub for connectivity to the Chinese market that is so important to market participants and the wider metals industry,” Chamberlain said.