HKEx's Li dispenses with LME warehouse bazooka, pledges transparency

Industry News 10:30:29AM Oct 08, 2013 Source:SMM

Mon, 7 Oct 17:04:00 GMT

* Li says LME has listened to complaints about LME warehousing rules
* "We need to figure out how to do" transparency, he says
* For a TAKE-A-LOOK on stories from LME Week, click on [ID:nL6N0HX0ZR]

(Updates with quotes and context)

By Susan Thomas and Maytaal Angel

LONDON, Oct 7 (Reuters) - The London Metal Exchange's (LME) owner put talk of aiming a bazooka at its warehousing network to one side on Monday, saying it would make changes in response to stakeholders' complaints and "find a way" to improve transparency on trading positions.

Hong Kong Exchanges and Clearing <0388.HK> Chief Executive Charles Li played down a crisis that has threatened to engulf the exchange, stating that the LME had listened to stakeholders all along the metal production and supply chain.

"Warehousing is not a bazooka problem, it's a Chinese medicine problem," Li told Reuters on the sidelines of a seminar kicking off the LME Week global industry gathering.

The LME is the world's biggest marketplace for industrial metals. Its regulations allow companies operating warehouses in the global network registered by the exchange to release only a small fraction of their inventories each day.

Warehouse companies owned by big banks and trading houses have made money by building stocks in LME-registered warehouses and allowing queues to grow for clients seeking to withdraw material.

Clients who have bought supplies can face long and costly waits, all the while paying rent to the warehouse companies.

End-users say waiting times of more than a year to get metal out have distorted availability and inflated physical prices to record highs - especially for aluminium, which is in chronic oversupply.

Last year, Li promised to aim a "bazooka" at the problem.[ID:nL5E8LF92M]

The LME has now proposed that, as of next April, a warehouse company with waiting times of more than 100 days in a single location must load out more metal than it loads in, according to a formula. [ID:nL1N0FL088]

New LME CEO Garry Jones said the exchange had consulted widely. "We'll make a decision. It could be in October, could be in November, could be any time after the board meeting," he said on the sidelines of the seminar.


CONSULTATION OVER

A board meeting is due to take place by the end of October.

"We've finished the consultation, it was very exhaustive," Li said. "People were not shy, and the views were very divergent. Whatever changes we make, some people will applaud, others will say it won't make any difference, and others will say 'We don't like it at all'."

Last month, the world's two biggest aluminium producers, Russia's United Company Rusal <0486.HK> and U.S.-based Alcoa , urged the LME to match its U.S. rival, the CME Group , in providing data about investors' long and short positions and about who holds inventories.

The LME has dropped its resistance to publishing detailed reports on the number of commodity contracts held by hedge funds, commercial users and other market participants.

Li said more transparency had to be welcomed:

"We need to figure out how to do it and make sure that the information that people want to see is available."

Li and Jones are also facing changes within the LME.

Four executives have stepped down in recent months: CEO Martin Abbott, Deputy CEO Diarmuid O'Hegarty, LME head of Asia commodities business Liz Milan and LME head of business development Chris Evans.

"Clearly we have seen some changes, that's natural for any acquisition, I don't think we have anything to apologise for, we kept all the people we wanted (and) some people move on. I wish them luck," said Li.

He added that the LME committees that look after users' interests were robust.

"They operate extremely responsibly. Sometimes I sit in these meetings thinking 'They still think they own the exchange', which is good," Li said.


(Additional reporting by Veronica Brown and Silvia Antonioli in London; Editing by Kevin Liffey)

((veronica.brown@thomsonreuters.com))


 

Key Words:  LMEWEEK/CONSULTATION  

HKEx's Li dispenses with LME warehouse bazooka, pledges transparency

Industry News 10:30:29AM Oct 08, 2013 Source:SMM

Mon, 7 Oct 17:04:00 GMT

* Li says LME has listened to complaints about LME warehousing rules
* "We need to figure out how to do" transparency, he says
* For a TAKE-A-LOOK on stories from LME Week, click on [ID:nL6N0HX0ZR]

(Updates with quotes and context)

By Susan Thomas and Maytaal Angel

LONDON, Oct 7 (Reuters) - The London Metal Exchange's (LME) owner put talk of aiming a bazooka at its warehousing network to one side on Monday, saying it would make changes in response to stakeholders' complaints and "find a way" to improve transparency on trading positions.

Hong Kong Exchanges and Clearing <0388.HK> Chief Executive Charles Li played down a crisis that has threatened to engulf the exchange, stating that the LME had listened to stakeholders all along the metal production and supply chain.

"Warehousing is not a bazooka problem, it's a Chinese medicine problem," Li told Reuters on the sidelines of a seminar kicking off the LME Week global industry gathering.

The LME is the world's biggest marketplace for industrial metals. Its regulations allow companies operating warehouses in the global network registered by the exchange to release only a small fraction of their inventories each day.

Warehouse companies owned by big banks and trading houses have made money by building stocks in LME-registered warehouses and allowing queues to grow for clients seeking to withdraw material.

Clients who have bought supplies can face long and costly waits, all the while paying rent to the warehouse companies.

End-users say waiting times of more than a year to get metal out have distorted availability and inflated physical prices to record highs - especially for aluminium, which is in chronic oversupply.

Last year, Li promised to aim a "bazooka" at the problem.[ID:nL5E8LF92M]

The LME has now proposed that, as of next April, a warehouse company with waiting times of more than 100 days in a single location must load out more metal than it loads in, according to a formula. [ID:nL1N0FL088]

New LME CEO Garry Jones said the exchange had consulted widely. "We'll make a decision. It could be in October, could be in November, could be any time after the board meeting," he said on the sidelines of the seminar.


CONSULTATION OVER

A board meeting is due to take place by the end of October.

"We've finished the consultation, it was very exhaustive," Li said. "People were not shy, and the views were very divergent. Whatever changes we make, some people will applaud, others will say it won't make any difference, and others will say 'We don't like it at all'."

Last month, the world's two biggest aluminium producers, Russia's United Company Rusal <0486.HK> and U.S.-based Alcoa , urged the LME to match its U.S. rival, the CME Group , in providing data about investors' long and short positions and about who holds inventories.

The LME has dropped its resistance to publishing detailed reports on the number of commodity contracts held by hedge funds, commercial users and other market participants.

Li said more transparency had to be welcomed:

"We need to figure out how to do it and make sure that the information that people want to see is available."

Li and Jones are also facing changes within the LME.

Four executives have stepped down in recent months: CEO Martin Abbott, Deputy CEO Diarmuid O'Hegarty, LME head of Asia commodities business Liz Milan and LME head of business development Chris Evans.

"Clearly we have seen some changes, that's natural for any acquisition, I don't think we have anything to apologise for, we kept all the people we wanted (and) some people move on. I wish them luck," said Li.

He added that the LME committees that look after users' interests were robust.

"They operate extremely responsibly. Sometimes I sit in these meetings thinking 'They still think they own the exchange', which is good," Li said.


(Additional reporting by Veronica Brown and Silvia Antonioli in London; Editing by Kevin Liffey)

((veronica.brown@thomsonreuters.com))


 

Key Words:  LMEWEEK/CONSULTATION