The LME in Asia. Garry Jones CEO London Metal Exchange

Transcription

1 The LME in Asia Garry Jones CEO London Metal Exchange

2 THE RING The developments: LME growth in Asia

3 LME contracts LME Copper The developments: LME Lead LME Zinc growth in Asia LME Tin LME Aluminium LME Nickel LME Aluminium Alloy LMEX LME NASAAC LMEminis LME Steel Billet LME Molybdenum LME Cobalt

4 Lots (millions) LME volumes million lots, $15.4 trillion and 3.47 billion tonnes million lots 2013 Up 6.4% to date Tin, Lead, NASAAC, Al Alloy, Plastics, Steel, Minor metals, minis and LME Swaps Nickel Zinc Copper Aluminium The developments: LME growth in Asia Year 85% of worlds physical metal hedged on LME Shanghai, Comex, MCX

5 The last 12 months at the LME LME LME Copper Volume 170 million lots 42 million lots Notional turnover $15 trillion $7.8 trillion Tonnes traded 4 billion tonnes 1 billion tonnes (50 x world production) Market share (Oct 2013) 88% 72%

6 LME trading venues Inter-office Telephone Trading (24 hours) The ring Floor Trading ( London Time) LMEselect Screen Trading ( London Time)

7 LMEselect Currently processes around 1.25 million market data messages a day 3 Months is the most actively traded contract Approximately 90-95% of all 3 months trading is transacted on LMEselect Employs a messaging to trade ratio of 20 messages per 1 trade. Users are charged for exceeding the ratio Direct access for Members, Independent Software Vendors and Market Data Specialists. Clients can t currently connect directly No market making or liquidity provider schemes

8 The developments: LME growth in Asia

9 Development of LME within Asia 2002 & 2004 South Korea and Malaysia listed as warehouse locations LME select extends opening to 1am UK for the Asian market (9am China GMT) Development of LME within Asia 2011 LME open Singapore office LME Asian Benchmark launched 2011 First LME China Roadshow Ten seminars in 4 locations Jul 2012 BOCI Global Commodities joins LME Dec 2012 HKEx acquires LME 2013 Kaoshiung, Taiwan added to LME approved warehouse locations

10 Growth of Asian trading on LMEselect Covers 1/3 LME select trading day but less than 1/3 of 3M trading Room to grow

11 On-going Collaboration Memorandums of understanding signed with - China Beijing International Mining Exchange (CBMX) June 2013 The signing of the MOU is an important step forward for CBMX to promote its China Iron Ore Spot Trading Platform internationally, and to provide diversified service for the participants of global iron ore market, said Mr Dong. - Bank of China Limited (BOC) June 2013 The MOU entered into today marks the beginning of our collaboration to examine the feasibility of LME contracts to be cleared in RMB and potential development of RMB-denominated commodity products in the HKEx Group platforms, said Mr Li. This collaboration also demonstrates our commitment to expanding the membership base of the LME and reaching out to users of the LME in different markets.

12 LME Asian Benchmark - Indicative price for the Asian market - Extended to RMB priced, cleared and settled contracts in the future

13 LME copper brands 87 brands from 27 countries totalling 5.4 million tonnes of copper capacity

14 Copper Warehouse Locations 12 countries and 23 locations approved by the LME - Kaoshiung, Taiwan to be listed on 21 November Antwerp, Belgium 7. Vlissingen, Netherlands 2. Barcelona, Spain 8. Bilbao, Spain 3. Hamburg, Germany 9. Helsingborg, Sweden 4. Leghorn, Italy 10. Hull, UK 5. Trieste, Italy 11. Liverpool, UK 6. Rotterdam, Netherlands NEW Kaoshiung, Taiwan 1. Baltimore, Maryland 2. Chicago, Illinois 3. Mobile, Alabama 4. New Orleans, Louisiana 5. St. Louis, Missouri 1. Dubai, UAE 1. Johor (Malaysia) 2. Singapore 3. Port Klang (Malaysia) 4. Busan (South Korea) 5. Gwangyang (South Korea) 6. Incheon (South Korea)

15 What does the Asian copper market want? A credible global benchmark A credible benchmark price in RNB Easier access to LME trading Cash settled monthly contracts as well as prompt date structure New contracts for the Asian region eg. Iron ore, thermal coal

16 How can we deliver it? Leverage HKEx s expertise in Asia and proximity to the largest consumer of metals. Together LME and HKEx can offer: RMB priced metal products Alternative markets/products Best possible platforms for trading metal

17 The warehousing review

18 Continued load-in of metal YTD 760,000 mt IN and 615,000 mt OUT NET IN 145,000 mt

19 LME Asian copper stocks declining - 90% of stock in Johor, Malaysia - 140,000 tonnes cancelled (87% of Asian copper stock) - Queue 123 days (delivery rate 2,000 mt per day, then 1,500 mt per day) Metal being shipped from LME Asian warehouses to China for financing

20 A comprehensive market consultation process Meetings offered with all stakeholders Pre-consultation internal LME review Consultation Over 70 stakeholder meetings 33 written responses LME analysis Economic analysis Merits of the Proposal Unintended consequences Implementation details Other proposed approaches LME Board FCA and legal review Public announcement Comprehensive report published 1 July September October 2013 Today

21 Economic background LME s view of the relationship between queues and premiums

22 Load-out scenarios - Load-out will always be greater than load-in

23 Warehouse ownership Existing best-practice information barriers Highly unlikely that LME could exercise powers to restrict warehouse ownership As such, appropriate response is to ensure validity of information barriers LME already requires and ensures bestpractice information barriers Market engagement to communicate the key role of these protections to the LME system

24 Representation of physical metals community Enhanced engagement in the LME governance structure Physical users already key members of metals committees and User Committee However, clear market desire for a specific forum for physical market issues to be discussed Creation of Physical Market Committee, with representation on Warehousing Committee, User Committee and clear escalation route to the LME Board

25 A comprehensive warehouse reform package Detailed, practical and balanced set of measures

26 Key business development workstreams Driving forwards the LME business model

27 Why can we deliver it? LME: A global exchange Trading Members Pricing Brands Warehousing

28 2013 MA LONG XU XIN WANG HAO ZHANG JIKE WANG LIQUIN 2000 LIU GUOLIANG KONG LINGHUI 1979 GUO YUEHUA HUANG LIANG LI ZHENSHI

29 Disclaimer The information contained within this presentation is for illustrative and educational purposes only and should not be relied upon in making any investment decision. Whilst every effort has been made to ensure the information is up-to-date and correct, the LME cannot guarantee that it is completely accurate and free from human error.