October 11, 2019 / 9:16 AM / 3 days ago

CME's physical aluminum delivery gains traction in Asia warehouses

BEIJING (Reuters) - CME Group Inc’s physical delivery of aluminum has gained traction since September after expanding its warehousing network beyond the United States into Europe and Asia, fueled by growing liquidity in Asian market, a company official said.

FILE PHOTO: Men enter the CME Group offices in New York, U.S., October 18, 2017. REUTERS/Brendan McDermid/File Photo

“We are starting to see actually more and more materials coming into our warehouses,” Young-Jin Chang, CME’s Global Head of Metals told Reuters by telephone on Friday, adding more stocks of the light metal were expected in Asian locations.

Aluminum stocks at Asian warehouses in Malaysia and Singapore stood at 13,500 tonnes as of Oct. 10, data from CME showed, accounting for more than 70% of its whole 19,221 tonne inventory. Ports at three European countries in Spain, Belgium and The Netherlands had no inventory on Thursday.

CME, the world’s largest futures exchange operator, has been steadily building up its storage network. The group has been lately focusing on developing its aluminum contract given the growing market for the metal, Young-Jin said.

Aluminum output in Asia has surged in the last 10 years, with China’s production growing more than 166% since 2009, data compiled by the International Aluminum Institute showed.

The U.S. exchange extended its aluminum warehouse locations to five countries in Europe and Asia this year, expanding its footprint to 14 warehouses in 10 locations worldwide.

China, the world’s top aluminum producer, churned out 23.47 million tonnes of aluminum in the first eight months of 2019.

Asia and China continue to be key areas for the bourse’s growth strategy in the metals complex, Young-Jin said.

Besides Malaysia and Singapore, CME also launched warehouses for zinc and lead in South Korea on top of the two countries.

“At this time we do not have a plan to expand copper beyond the U.S. warehousing,” she said.

CME is enhancing its precious metals offering. The group is set to launch two new gold futures contracts in partnership with Shanghai Gold Exchange on Oct. 14, denominated in U.S. dollars and Renminbi, it said in September.

Reporting by Min Zhang and Shivani Singh; editing by David Evans

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