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In
recent years the CME, the world's largest futures market
operator, has been steadily building its storage network -
partly as a result of controversy surrounding the LME warehouse
system.
The U.S. exchange has been negotiating with firms about joining
its list of approved warehouses to hold metals such as copper,
aluminum, zinc and lead, which on the CME are physically
deliverable.
"The CME is keen on growing its warehousing system, they want
more locations," one source said. "They want to get more
companies involved around the world, in Asia, the United States
and Europe." CME declined to comment.
Sources did not specify how many new warehouses the CME was
targeting, but while catching up with the LME is a tall order,
the latest move is seen as a bold one.
All three sources declined to be named because they are not
authorized to speak to the media.
The CME has a network of 24 approved warehouses according to
information in its website.
Most of these are in the United States, but there are also three
in Europe, added recently to store material for its new lead
contract.
The LME has a network of more than 600 approved warehouses in 37
locations across the world, including Asia. It is owned by Hong
Kong Exchanges and Clearing Ltd.
Sources said some new contracts are part of a move to poach
business from the LME, the world's biggest and oldest metals
market place, that has traditionally been a first port of call
for metal consumers and producers.
"The lead and zinc contracts are part of its (CME's) push to
take the LME on... it's definitely one to watch," one industry
source said.
The CME zinc contract was launched in 2015 and earlier this year
the exchange followed with a lead futures contract.
LME volumes greatly surpass those on the CME.
The CME's move comes after consumers complained bitterly several
years ago that they had to endure long queues of up to two years
to get delivery of aluminum at several LME warehouse due to
backlogs.
Those delays meant fat profits for warehouse owners who
collected rent as long queues built up, but the LME has imposed
a series of reforms in recent years which have cut down the
waiting times.
(Editing by Veronica Brown and William Hardy)
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