Exclusive-LME considers easing rules to boost Hong Kong as metals hub 

By Pratima Desai

LONDON, July 1 (Reuters) - The London Metal Exchange is considering easing rules, including allowing the storage of aluminium outside, to boost Hong Kong as a metals location, four industry sources said, reflecting China’s drive for greater influence over global metals markets.

Hong Kong became an active LME warehouse location in July 2025, but very little metal has been deposited there since.

Two of the sources said that HKEx executives had asked warehouse companies what barriers needed removing to make Hong Kong viable for storage.

The 149-year-old LME raised outside storage as an option for aluminium in a March consultation paper “on a location-by-location basis”. 

The four sources said this was aimed at Hong Kong, where suitable space is limited.

"Conversations regarding space availability at certain locations have raised the question as to whether outside storage could ameliorate space concerns," the exchange said in the consultation, which closed on May 8.

Responses to the consultation have not yet been disclosed.

Securing LME-approved storage facilities in mainland China, the world’s top industrial metals consumer, has long been an ambition for the exchange. China, meanwhile, is keen to take a bigger role, including through Chinese brokers lining up to become LME members.

The LME, the world's oldest and largest metals market, is owned by Hong Kong Exchanges and Clearing. 

The exchange briefly allowed outside storage for aluminium in the mid-1990s but ended the practice because of concerns over weather damage and security.

LME Chairman John Williamson said in May that the exchange had extended its warehousing network into Hong Kong, “reinforcing” its role as a hub with “unrivalled connectivity to the Chinese mainland”.

As part of that effort, the LME will approve warehouses anywhere in Hong Kong, unlike other locations, where storage is typically required to be close to the port, the sources said. 

MOST EXPENSIVE LOCATION

LME warehouses are usually in areas of net consumption, where manufacturers need physical metal. Hong Kong does not fit that mould, with services accounting for more than 90% of its revenue.

It is also the most expensive LME location for primary aluminium storage, with rents at 66 U.S. cents per metric ton per day, roughly 21% above the average for other locations. Rents for copper and nickel in Hong Kong are also 21% higher.

Additionally, Hong Kong’s warehouse space is largely multi-storey, making it impractical for heavy metal storage because higher floors cannot bear the weight.

Hong Kong accounted for only about 1.7% of total LME warehouse stocks in May.

LME data for May showed warehouses in Hong Kong held 24,665 metric tons of metal, compared with 483,381 tons in Singapore, 280,646 tons in South Korea and 265,345 tons in Taiwan. 

“We are very pleased with the success of Hong Kong warehousing ... It is now our ninth-largest location in terms of stocks, with many warehouses approaching capacity," the LME said in response to a request for comment.

"The addition of Hong Kong reinforces our commitment to enable LME warehousing services along the world’s key global trade corridors. We will share our warehousing consultation feedback with the market in the coming weeks.”

(Reporting by Pratima DesaiAdditional reporting by Amy LvEditing by Veronica Brown and David Goodman)