LME’s new Hong Kong warehouses attract copper deliveries

The London Metal Exchange’s new warehouses in Hong Kong have attracted 100 metric tons of copper, which were stored off warrant, title documents conferring ownership, ahead of this location going live in mid-July, daily LME data showed.

The LME, owned by Hong Kong Exchanges and Clearing, approved Hong Kong as a warehouse delivery point in January as it sees it as a gateway to top metals consumer China.

“The arrival of metal in LME-approved warehouses shows that the listing of Hong Kong as a delivery location is an attractive option for metal market participants,” the LME said.

The owners of the metal will have an option to place it on warrant, making it deliverable against the LME contracts, from July 15, the exchange, the world’s oldest and largest market for industrial metals, added.

Some additional amounts of copper were expected to come to the LME-registered warehouses in Hong Kong ahead of July 15, although they will be small in size, a source at an LME-registered warehousing firm told Reuters.

Hong Kong’s higher warehouse costs have previously raised questions about the viability of the new storage facilities compared with other sites in Asia like South Korea or Malaysia.

According to the LME data, there were 11,356 tons of copper stored off warrant in total in the LME-registered warehouses in Asia, mainly in South Korea, as of July 2.

However, the market is monitoring closely any inflows of the metal to the LME-registered warehouses due to accumulated tightness in the copper market after massive outflows to the US earlier this year.

The LME copper stocks are down 64% since mid-February at 97,400 tons, although they have edged up in July, helping to reduce premium for nearby contracts against those with longer maturities.

(By Polina Devitt; Editing by Chizu Nomiyama)