Opinion | LME should strike while the iron is hot

The London Metal Exchange has a clever plan for Hong Kong, and its owner Hong Kong Exchanges and Clearing likes the idea very much. The plan is to authorise a new warehouse in the city to add to the LME’s global storage network to facilitate the physical exchange of metals such as aluminium and zinc between mainland China and the rest of the world.

Considering the mainland has been the world’s single largest importer of raw commodities, upon which most of LME contracts depend, one has to wonder why it has not happened already.

The LME does not operate such warehouses or own the commodities they store. What it does do is authorise third-party operators to run their own storage for LME-registered metals. Its global network consists of 450 warehouses. In Asia, it already has warehouses in Japan, South Korea, Malaysia, Singapore and Taiwan.

Hong Kong will be ideal to serve as a bridgehead as the location will help close the gaps in delivery time and cut logistics costs. It also may help with metals pricing and enhance arbitrage opportunities between mainland and international pricing, according to HKEX chief executive Bonnie Chan Yiting.

The rise of green technologies is expected to increase demand for such metals as copper, lithium, nickel and cobalt, which are crucial to producing electric vehicles and solar panels.

Hong Kong already has the logistics and infrastructure as well as the international financial facilities for the job.