HKEx chief 'deeply' concerned about long delays at LME warehouses

PUBLISHED : Tuesday, 16 October, 2012, 12:00am
UPDATED : Tuesday, 16 October, 2012, 6:13am

Hong Kong Exchanges and Clearing is "absolutely focused" on the long waits for metal in London Metal Exchange warehouses and whether they are distorting the market, chief executive Charles Li Xiaojia said.

HKEx, which agreed to pay US$2.2 billion for the LME, is expected to complete the purchase in this quarter.

Reports on LME warehousing issues are "deeply concerning", Li said. He said he will study the results of the LME's six-month review and consult members before making changes.

Withdrawing aluminium can take as long as 57 weeks at the Dutch port of Vlissingen and 41 weeks in Detroit, according to Bloomberg data.

"It is a very complex issue," Li said. "We need to understand whether or not we're really talking about people waiting for a year, or people having to pay premium but they continue production. If somehow the LME system is making the real economy suffer on that basis in that way, that's unacceptable."

The LME changed its rules in April to increase the minimum amount that must be delivered daily, after getting complaints about delays since at least 2009.

HKEx will seek to bring "a lot more volume" to the LME after it takes over and may help the LME to set up warehouses in China, reduce trading restrictions in China, or even expand operations to Asian hours and clearing contracts in yuan, Li said.

HKEx may expand the LME into trading iron ore, freight, coking coal and even agricultural products, including rubber, as part of the next stage of growth after the acquisition, he said.

"There are plenty of things to do," Li said. "Meanwhile we will really make sure the LME as a commercial entity is fully resourced."