LME Considers Hong Kong as a Global Warehouse Location, According to HKEX Owner – Reuters

By Mai Nguyen and Siyi Liu

HONG KONG – The London Metal Exchange (LME) is considering the addition of Hong Kong as a warehouse location, according to the chief executive of its parent company, as part of efforts to enhance its global logistics network.

Since acquiring the LME in 2012 for $2.2 billion, Hong Kong Exchanges and Clearing (HKEX) has aimed to register warehouses in China, the largest consumer of industrial metals, to store metals traded on the LME.

Recently, the exchange has expressed a desire to expand its global warehouse network, including the potential establishment of a warehouse in Jeddah, Saudi Arabia. Additionally, reports emerged earlier in the year regarding plans to explore a warehouse location in Hong Kong.

Bonnie Chan confirmed this exploration, stating, "We recently commissioned a third-party feasibility study on this idea and we have been receiving great support from the local market." She noted that LME warehouses in Hong Kong could enhance the connection between mainland physical metals markets and international pricing on the LME, while also creating more arbitrage opportunities, addressing delivery network gaps, and reducing logistics costs through improved road connectivity to southern China.

As the leading global marketplace for metals, the LME has sanctioned storage facilities in 32 locations across the U.S., Europe, and Asia for metals such as aluminum and zinc that are pivotal to its contracts.

Chan, speaking at the LMEWeek Asia event in Hong Kong, did not specify a timeline for the initiative. However, Robin Martin, the exchange’s head of market development, indicated that the LME anticipates providing an update on this plan later this year.

Some critics have expressed concerns regarding this strategy, citing the risks related to China’s increasing influence over foreign companies and individuals in the region. Additionally, there are apprehensions regarding the higher cost of warehouse space in Hong Kong compared to other nearby locations, as well as the fact that the city does not have a significant consumption of metals.

In a separate discussion, LME CEO Matt Chamberlain mentioned that the exchange will proceed with consultations on the final regulatory adjustments concerning the Jeddah expansion but remains optimistic about this initiative.