Bank of China Seeks to Join World’s Biggest Metals Exchange
BOCI Global Commodities (U.K.) Ltd. is seeking to become a category 2 member, giving it the right to trade by telephone and electronically, the LME said in a notice today. It won’t have access to the ring, London’s last open-outcry trading floor.
China accounts for about 39 percent of global copper usage, 42 percent of aluminum and 43 percent of nickel demand, according to Barclays Capital. The LME opened its first Asian office in Singapore in 2010 and introduced new contracts with the Singapore Exchange Ltd. last year to attract new investors. The LME is also considering takeover bids for the 135-year-old exchange after trading volume climbed to a record last year.
“China is such a big user of the LME,” said Herwig Schmidt, head of sales at Triland Metals Ltd., one of 12 companies trading on the floor of the LME and a unit of Tokyo- based Mitsubishi Corp. “It’s the first step that encourages others to follow.”
The LME’s board will review the application on April 23, said Chris Evans, the exchange’s head of business development.
The LME handles more than 80 percent of industrial metals futures trading. The Bank of China is the country’s third- largest lender by assets. BOCI Global Commodities was not immediately able to provide comment.
Floor trading is reserved for category 1 members. The LME has 26 category 2 members including Goldman Sachs Group Inc. and Toyota Tsusho Corp. (8015), the trading house part-owned by Japanese carmaker Toyota Motor Corp., according to the LME’s website.
“It is very exciting for the LME to have this type of development from a leading bank from the world’s largest consumer,” Mo Ahmadzadeh, senior vice president of INTL FCStone Inc. in New York, said by e-mail. An LME member that is affiliated with a company from China may be able to manage more trading on behalf of domestic clients from the country than current brokers, he said.
A new category 2 member would have to buy B shares of the LME. They last traded at 70 pounds ($111) on Feb. 24, according to data from JPMorgan Chase & Co. on Bloomberg. Ordinary shares confer ownership.
The LME will invite takeover offers from a “small number” of bidders by May 7. It may be worth $1.3 billion, hedge-fund adviser Equity Research Desk has said. CME Group Inc., NYSE Euronext and Intercontinental Exchange Inc. made preliminary offers, according to three people with direct knowledge of the matter.
Investors bought and sold $15.4 trillion of LME contracts last year, up 33 percent from 2010. The LME Index (LMEX) of the six main metals traded on the exchange -- copper, aluminum, nickel, zinc, lead and tin -- more than tripled in the decade through 2011 as demand from emerging markets led by China overwhelmed supply from mines.
BOCI Global Commodities, owned by the Chinese bank’s BOC International Holdings Ltd. unit, was authorized by U.K. regulators in January to hold client money. Bank of China plans to open a Chicago branch to strengthen ties with commodities markets, China Daily reported March 1.
G.H. Financials Ltd., based in London, also applied for category 2 membership, according to LME.
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