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LME undertaking consultation around Saudi expansion: Report

London Metal Exchange will undertake consulting on the final rulemaking around the Jeddah expansion, but said it remains positive on that initiative

by Reuters

June 27, 2024

Image credit: Unsplash

The London Metal Exchange (LME) is exploring the possibility of listing Hong Kong as an LME warehouse location, the chief executive of its owner said on Thursday, as the exchange looks to strengthen its global logistics footprint.

Registering warehouses in China, the world’s largest consumer of industrial metals, to store metal traded on the LME has been a strategic aim since Hong Kong Exchanges and Clearing (HKEX) bought the LME in 2012 for $2.2bn.

The exchange has recently said it is looking to expand its global warehouse network to add Saudi port Jeddah while Reuters reported in January it was also examining opening a warehouse location in Hong Kong.

“We recently commissioned a third party feasibility study on this idea and we have been receiving great support from the local market,” said Bonnie Chan, confirming the Reuters report.

Separately, the LME will undertake consulting on the “final rulemaking” around the Jeddah expansion, but remains positive on that initiative, LME CEO Matt Chamberlain, said, speaking at the same event.

LME’s expansive network

As the world’s biggest metals marketplace, the LME has approved metals storage facilities in 32 locations across the US, Europe and Asia that can take delivery of metals like aluminium, copper and zinc that underpin its contracts.

“LME warehouses in Hong Kong could strengthen the link between mainland physical metals markets and international pricing on the LME, create more market arbitrage opportunities, close gaps in delivery networks and improve logistics costs with road connectivity to southern China,” she added.

Chan, speaking at an LMEWeek Asia event in Hong Kong, did not give a timeline for any developments but said the market should “stay tuned”.

Critics of the plan have raised concerns about the strategy due to risks associated with China’s growing influence over foreign firms and individuals in the territory.

They have also noted that Hong Kong’s warehouse space is more expensive than other locations nearby and the city is not a large consumer of metals.

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