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Why the London Metal Exchange’s Hong Kong warehouses matter to the city’s financial status

The approval of the first four official London Metal Exchange (LME) warehouses in Hong Kong gives a long-awaited boost to the city’s ambition of playing a more integral role in global metals trading.

Many industry leaders, including Tiger Shi, CEO of Bands Financial, and Clara Chan, CEO of Hong Kong-listed Lee Kee Group, believe the development marks a pivotal step in strengthening the city’s position as a strategic commodities hub in Asia.

The establishment of the LME warehouses in the city will also help align commodity prices in mainland China with the international market, they said.

The warehouses mark “a major step forward in integrating the international and Chinese base metals markets”, Shi said in an interview. They also align with efforts to bolster Hong Kong’s role in commodities trading, after Chief Executive John Lee Ka-chiu said in October that the city would develop an international gold trading market.

The LME approved the establishment the warehouses in Hong Kong on April 15, following the exchange’s approval of Hong Kong as an LME warehouse location on January 20. LME has been a wholly owned subsidiary of stock exchange operator Hong Kong Exchanges and Clearing for 13 years.

The LME does not own or operate such warehouses; it authorises companies to store LME-registered metals on behalf of warrant holders.

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