The London Metal Exchange (LME) on Monday listed Hong Kong as one of its global warehouse locations to meet growing demand for physical trading of metals between mainland China and the rest of the world, while bolstering Hong Kong's role as a conduit.
Matthew Chamberlain, chief executive of the LME, said: “The addition of Hong Kong to our global warehousing network is an exciting development, providing warehousing facilities closer than ever to the metals hub of mainland China.”
According to an official statement, Hong Kong will store LME-registered aluminum alloys, primary aluminum, copper, lead, nickel, tin and zinc. Three months after the first warehousing company received approval, the city will become an active location.
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CEO Bonnie Chan Yiting said the move "represents an important milestone, bringing China, the world's largest metals consumer, closer to the world's most active metals trading community, strengthening China's physical metals market and London Metal Exchange international pricing Links between” exchange operator Hong Kong Exchanges and Clearing (HKEX).
The LME has more than 465 warehouses in 32 locations around the world, but it does not own or operate these facilities. Instead, it authorizes warehouse companies and the warehouses they operate to store LME-registered brands of metal on behalf of warrant holders. As early as 2012, when the Hong Kong Exchange acquired the LME for US$2.2 billion, the LME has been using China as the location of its warehouses.
Chamberlain said: "Mainland China is the world's largest consumer of metals, and with its excellent commercial infrastructure, Hong Kong is a natural hub to connect to the Chinese market, which is important to market participants and the wider metals industry."
Chan said the recognition would support Hong Kong's development as a regional commodities trading center.
Hong Kong Exchanges and Clearing (HKEX) CEO Michelle Chan speaks at the LME Asia Week held at the Hong Kong Exchange in Central on June 27, 2024. Photo: Chen Xiaomei alt= Hong Kong Exchanges and Clearing (HKEX) Chief Executive Officer Chen Yiting, speaks at the LME Asia Week at the Hong Kong Exchange in Central on June 27, 2024. Photo: Chen Xiaomei>
"China's commitment to sustainable development and continued economic progress will drive continued growth in its demand for metals," she said. “The strategic location of the new LME warehouse in Hong Kong, with its strong transportation infrastructure and trusted international framework, will help reduce logistics costs and increase the efficiency of the delivery network, benefiting metals consumers and producers.”
The approval of Hong Kong as a warehouse location is in line with efforts to strengthen its role in commodities trading after Chief Executive John Lee said in October that the city would develop an international gold trading market.
The LME was founded in 1877 and last year metal trading volume was 178 million lots, equivalent to $18 trillion and 4 billion tonnes, according to its website.
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