LME Revenue Advanced 28% Last Year After Higher Fee

The London Metal Exchange, the world’s largest metals marketplace, reported a 28 percent jump in revenue last year after raising fees.

Revenue increased to $HK976 million ($126 million) from $HK764 million a year earlier, Hong Kong Exchanges & Clearing Ltd., the bourse’s parent company, said in an earnings report today. The LME’s higher trading fees in July added HK$155 million, it said. The LME is planning to introduce its own clearinghouse by the end of 2014, further boosting revenue.

Hong Kong Exchanges, the world’s largest exchange operator by market value, acquired the LME in December for $2.2 billion to expand into commodities. Copper on the LME fell 21 percent in 2011 on concern slower growth in China would curb demand from the top metals buyer. Prices rose 4.4 percent in 2012.

“The urbanization, industrialization has led to China emerging as a significant, major consumer of commodities,” Martin Abbott, chief executive officer of the LME, said at a press conference in Hong Kong. “That is a trend that we do not believe is likely to be reversed any time in the near future and we have been a beneficiary of that growth.”

Fees Freeze

Hong Kong Exchanges pledged to freeze LME fees until at least January 2015. The revenue from the LME would have been $HK1.14 billion if higher fees that started July 2 were applied for the entire year, Hong Kong Exchanges said. The LME delayed the increase by four months after protests from some members.

Hong Kong Exchanges’ full-year profit fell 20 percent, the first drop in three years, as turnover and listings declined. Net income fell to HK$4.08 billion, or HK$3.74 a share, from HK$5.09 billion, or HK$4.70 a share, in 2011. The LME had a loss of HK$29 million, based on earnings before income, taxes, depreciation and amortization, compared with profit of HK$254 million the year before, it said.

“We are moving ahead with an expansion strategy for LME in the Asian time zones,” Charles Li, CEO of Hong Kong Exchanges, said in a statement today. The exchange wants to develop Asian time zone trading and clearing in commodities, extend the LME’s warehouses into mainland China and improve the metals bourse’s electronic platform.

The 136-year-old LME has a network of 765 warehouses in 36 locations in 14 countries, Hong Kong Exchanges said in today’s statement. Its 93 members include Goldman Sachs Group Inc., JPMorgan Chase & Co. and UBS AG. The LME’s share of global base metals futures rose to 83 percent last year from 80 percent in 2011, with open interest market share in zinc and aluminum gaining, according to the exchange. Commodities contributed 1 percent to Hong Kong Exchanges’ revenue, it said.

(Corrects time frame in second paragraph in story first published yesterday.)
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