Daily data from the London Metal Exchange (LME) showed that before its new warehouse in Hong Kong officially opened in mid-July, it had already attracted 100 mt of copper stored in a "non-warrant" form. The ownership certificates (warrants) for this copper had been cancelled, indicating that it was about to be withdrawn or used for physical delivery. The LME approved Hong Kong as a warehouse delivery point in January.
The LME stated: "The entry of metal into LME-approved warehouses indicates that Hong Kong is an attractive delivery location for metal market participants."
The London Metal Exchange, the world's oldest and largest industrial metal market, added that the owners of this metal would have the option to register it as warrants, enabling it to be delivered under LME contracts from July 15.
An industry source said that it was expected that some additional copper would enter the LME's registered warehouse in Hong Kong before July 15, though the volume would be small. Hong Kong's higher storage costs had previously raised questions about the feasibility of the new storage facility compared to other Asian warehouses in countries like South Korea or Malaysia.
According to LME data, as of July 2, a total of 11,356 mt of copper in LME's Asian warehouses (mainly in South Korea) were in a "cancelled warrant" state.
However, due to a significant outflow of copper inventories to the US earlier this year, leading to ongoing tightness in the copper market, the market is closely monitoring the inflow of metal into LME-registered warehouses. LME copper inventories have fallen by 64% since mid-February to 97,400 mt, though there was a slight increase in July, helping to reduce the premium of near-month contracts over far-month contracts.
