LONDON (Reuters) - The London Metal Exchange (LME) will not be able to open metal warehousing facilities in commodity consuming giant China any time soon, LME chief executive Garry Jones said on Tuesday, scaling back expectations for its biggest ambition.
The LME, the world’s biggest marketplace for industrial metals such as copper and aluminium, is likely to be the first to win permission and get round the ban on foreign bourses setting up depots in mainland China.
“One of our goals is to have warehouses in China, that will be a big step forward if that was to be allowed,” Jones told a conference in London.
But he played down expectations for a swift move forward.
“The change of the rules in China is some way off. I think we are dreaming if we think we will have warehousing there any time soon,” Jones said.
The LME has sought for many years to set up delivery networks in China to grow its business.
Such a move would be a triumph for the LME’s new owner, Hong Kong Exchanges and Clearing (HKEx) (0388.HK), whose chief executive Charles Li promised, during the $2.2 billion takeover last December, to bring LME-registered warehousing to China.
The LME is grappling with its global warehousing system, consulting with Britain’s Financial Conduct Authority (FCA) on proposed sweeping changes to storage policy after complaints from end users including major beverage can makers about long wait times for metals and inflated costs.
To support physical delivery of its contracts, the LME approves and licenses a network of more than 700 warehouses across 36 locations around the world.
But the business has stoked controversy as warehouse firms have made money by building up stocks and allowing queues to grow for clients seeking to withdraw material, all the time charging rent for storage.
End users say those steps have caused long wait times in warehouses which have distorted supplies and inflated physical prices to record highs.
The LME launched a consultation on the proposals in July, and is still considering the responses from the metals industry. It is due to hold a board meeting this month to discuss the plan, but there is no date yet for an announcement.
Reporting by Susan Thomas and Maytaal Angel; Writing by Veronica Brown; Editing by William Hardy