November 1, 2018 / 1:48 PM / 17 days ago

QME plans to extend spot-trading commodity platform

LONDON (Reuters) - China’s Qianhai Mercantile Exchange (QME) plans to add more commodities to its spot trading platform, possibly including metals needed for electric vehicles.

The QME, owned by Hong Kong Exchanges and Clearing (HKEX) (0388.HK), launched spot trading on Oct. 19 with alumina, the raw material for aluminum.

The exchange chose alumina because there was not a credible Chinese benchmark price for the ore, said Matthew Chamberlain, head of the HKEX-owned London Metal Exchange (LME).

“It’s clear in our discussions that there’s a big niche for discovering the price of alumina in China and that will extend to a whole bunch of other commodities,” Chamberlain told the Reuters Global Commodities Summit in London late on Wednesday.

When asked if the QME could trade metals used in batteries for electric vehicles, Chamberlain said: “We strongly believe that the idea of spot trading platforms could help across commodities, and why not battery metals? ... Nothing’s off the table.”

The LME, meanwhile, intends to use a blend of prices from two price-reporting agencies as the benchmark for the cash-settled alumina contract it plans to launch early next year, Chamberlain said, adding to a cash-settled futures contract for electric vehicle metal cobalt, slated for early next year, following by lithium, possibly in 2020.

The QME’s emphasis on trading bulk and upstream physical commodities would complement the LME’s focus on futures, Chamberlain added.

The launch of the QME, located in Shenzhen, only 50 km (30 miles) from Hong Kong, ended HKEX’s long wait for access to mainland China.

When HKEX bought the LME in 2012, it outlined a strategy to expand into top metals consumer China, but progress has been slow.

China has not allowed the LME - the world’s oldest and largest market for industrial metals - to establish its own warehouses on the mainland, but Chamberlain said he was encouraged by news on Wednesday about C. Steinweg, an approved LME warehouse provider.

The logistics and warehousing firm said it had been approved by the Shanghai Futures Exchange as the first fully foreign-owned official warehouse in mainland China.

“That’s a very positive sign that the community of warehouses that do LME warehousing are becoming increasingly active in China,” he said.

“We would be delighted to have LME delivery warehouses in China, but we fully accept that regulators aren’t quite ready for that yet.”

Reporting by Eric Onstad; Editing by Veronica Brown and David Goodman

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