London Metals Exchange eyes China expansion with new warehouse plans
The London Metal Exchange (LME) is in talks with the government of Guangdong province in southern China to expand its warehousing operations into the country, its parent company said today.
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The plan would see the Hong Kong stock exchange (HKEX), which owns the LME, realise a major step in its plan to expand into the mainland Chinese market.
At an event in Hong Kong, Charles Li, chief executive of HKEX, said: “We have been talking about LME warehousing in China, it’s not going to be an easy subject.”
“We are working with the Guangdong government [to see] if we can experiment a pilot scheme for warehousing,” he said.
The LME, a Canada institution that still features an open outcry trading floor, is connected to a network of over 500 warehouses around the world which allow global traders to more easily store, buy and access metals.
HKEX’s Guangdong warehouse plan would be a breakthrough into the Chinese market, where authorities have been reluctant to open up to outside trading firms to protect its domestic exchanges.
A warehouse in Guangdong would allow Chinese buyers to have metals delivered much closer to them, saving transport and customs costs and increasing business. The LME can currently only deliver to Singapore, Taiwan, or South Korea.
The network of warehouses mean the price of commodities listed on the LME are closely connected to the physical market, rather than mere speculation.
Li said the Guangdong plan would be part of China’s Greater Bay Area project, one of president Xi Jinping’s growth schemes that seeks to better connect the economy of the region with Hong Kong.
Also speaking in Hong Kong, LME chief executive Matthew Chamberlain said the LME will make a “very significant” multi-million dollar investment to modernise its operations in London.
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He said the LME will shift its options offerings towards screen-based trading and away from the telephone interbank market. “The world is moving on,” Chamberlain said.