March 9, 2018 / 10:33 AM / 15 days ago

Head of China's Maike hopes for LME metals warehousing in Shanghai free port

BEIJING (Reuters) - The head of Maike Group, China’s biggest privately held metals trader, said he would propose at this year’s parliament session to allow warehouses registered to the London Metal Exchange (LME) to be set up in Shanghai’s planned free-trade port.

Placing the LME warehouses, where metal can be stored for delivery into contracts on the exchange, in Shanghai would reduce costs for traders in China, the world’s biggest base metal consumer. Currently, Chinese traders must ship metal to sites across Asia to fulfill the contracts.

“Our biggest concern in this industry is the ability to set up LME delivery warehouses at the free-trade port of Shanghai,” Maike’s Chief Executive Officer (CEO) He Jinbi, who is also a delegate from Shaanxi province at the National People’s Congress (NPC) being held currently in Beijing, told Reuters in an interview this week.

In one of his proposals to the NPC, He hopes to “push” the China Securities Regulatory Commission to sanction the move as soon as possible. “This will have a great impact on the industry as a whole. It is convenient for financing, trading and services,” said He on Tuesday.

As of Friday afternoon, there were no details of He’s proposal on the official NPC website. The Congress will meet until March 20.

The official Shanghai Securities News reported in October that the city government submitted a draft plan for its first free-trade port. Shanghai will offer preferential import and export tax conditions in the port, it said.

“For years I have been calling for the establishment of the LME delivery warehouses in China,” He said. “China delivers billions of tons of products to the LME every year, all through South Korea, Singapore, Malaysia and other countries. The cost of this transportation is much more expensive.”

Getting approval would be a major victory for the Hong Kong Exchange (HKEx), which has sought government approval to set up LME warehouses in China since buying the exchange in 2012 for $2.2 billion.

It was a key plank of HKEx’s long-term plan for modernizing and overhauling the exchange.

Charles Li, HKEx chief executive officer, told Reuters in October that he has not pushed the issue with the Chinese government recently though he still wants the warehouses.

“Mainland warehouses at the appropriate time is one of HKEx Group’s long-term goals,” an HKEx spokesman said this week.

He also said Maike would be a major participant in copper options trading on the Shanghai Futures Exchange (ShFE), adding that preparations were almost finished and a launch would take place this year.

The ShFE did not immediately respond to a request for comment.

Reporting by Tom Daly; Editing by Christian Schmollinger

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