LME Taps Hong Kong to Narrow the Gap Between China and Global Markets

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The new facilities can store seven of the 14 LME-approved metals. This approval will boost the city’s aspirations and reinforce it as a global financial, trade, and logistics center.

The London Metal Exchange (LME) has approved four warehouses in Hong Kong, extending its network in mainland China, the world’s largest metal consumer.

LME was established in 1877 and traded 178 million metals last year, amounting to US$18 trillion and 4 billion tonnes.

The new facilities can store seven of the 14 LME-approved metals. This approval will boost the city’s aspirations and reinforce it as a global financial, trade, and logistics centre.

Christopher Hui Ching-yu, Secretary for Financial Services and the Treasury, stated that this approval will help develop Hong Kong’s commodity market.

He added that LME-approved warehouses in Hong Kong will provide delivery channels that efficiently trade metals, attract related business, and enhance the city’s role in global commodities and logistics.

Establishing warehouses in Hong Kong will align prices in China with the international market.

The warehouses played a crucial role in integrating international and Chinese base metal markets and helped develop an international gold trading market within the city.

On January 20, LME endorsed Hong Kong as a base to set up warehouses. On April 15, they approved establishing a base there. For the last 13 years, Hong Kong Exchanges and Clearing wholly owned LME.

The London Metal Exchange neither owns nor operates these types of warehouses. It just allows companies to store metals on behalf of warrant holders.

GKE Metal Logistics and China Resources Logistics will manage two warehouses. Henry Diaper & Co. with Sinotrans (HK) Warehousing, PGS (East Asia), and SF Supply Chain will run the remaining warehouses.

LME picked these locations after they passed many criteria, such as robust fiscal and regulatory systems, good transport networks, duty-free storage capabilities, and political and economic stability.

These storage facilities will store various metals, including aluminium alloy, copper, nickel, lead, tin, and zinc.

Chan, a non-ferrous metals supplier based in Hong Kong (HK) and operating throughout Asia, commented that HK, with a robust legal framework and regulatory environment, will help them manage risks and supply chain efficiency.

Chan is also part of a private think tank called the Better Hong Kong Foundation. In a report, the foundation stated that creating a Hong Kong commodities market for materials critical for clean energy and other emerging industries would help elevate the city’s significance in global trade.

China is the largest producer of non-ferrous metals globally. It is also the top consumer of six widely used non-ferrous metals: copper, aluminium, zinc, lead, nickel, and tin.

In 2024, the mainland traded those metals worth US $368.79 billion, marking an 11.4% increase compared to previous years.

According to a report by Xinhua News Agency (the official state news agency of the People’s Republic of China), non-ferrous metal companies will make a total profit of approximately 420 billion yuan (US$58 billion) in 2025, marking an increase of over 10%.

There is a growth in non-ferrous metals because of an increasing demand for electric cars and their parts, especially batteries.

According to John Browning, former LME board member, location plays a key role in commodity pricing.

Browning stated that price depends on quality, delivery dates, and logistics costs. Setting up warehouses in Hong Kong will align domestic and international prices and tackle the divergence observed in China’s domestic market.

Warehouses approved by the London Metal Exchange are also cost-effective and provide safe delivery options for metal trading.

Shi, a member of the LME User Committee, stated that opening Hong Kong warehouses would join the network of over 450 LME-approved warehouses across 33 locations and create an ecosystem.

Since the warehouses are close to China, delivery times are reduced, and players have fewer investment risks. Once the warehouses are set, banks can do business with them and get the benefits for the warehousing and logistics industry.