The potential for a trade war between the United States and China, and how China can gain more influence to price global commodities were two hot topics of the LME Asia Metals Seminar 2018 held at the Hong Kong Convention and Exhibition Centre on 17 May.
Nearly 700 industry participants filled the convention hall for the premier event during LME Asia Week, the annual commodities showcase hosted by HKEX and its wholly-owned subsidiary, the LME.
HKEX Chairman Laura Cha delivered a welcome address, saying the looming trade war between the United States and China could have a deep impact on the metals market and has been top of mind for many people. How we navigate through these uncertain times will be key to our long-term success, she said.
Hong Kong has not traditionally been a natural home for commodities, although it has a very strong base in equities. To be a true global financial centre, HKEX’s business must encompass multiple asset classes and products, which is why HKEX acquired the world’s leading metal exchange, the LME, six years ago, she said.
The LME is looking to launch several new cash-settled contracts including LMEprecious options. The four key markets we are working to expand include precious metals, aluminium, ferrous metals, and battery materials, Cha added.
HKEX Chief Executive Charles Li said in his keynote speech that HKEX is making very solid progress on all fronts, with volume recovering on the LME, adding the whole business is on solid ground.
He said HKEX has big aspirations and is working on three main objectives: resolving the onshore warehouse issue, finding a better way to connect the domestic market with the LME and other international markets, and developing the onshore commodities business through the Qianhai Mercantile Exchange (QME).
He said there are still debates on how to help China achieve better influence in global commodity pricing. HKEX is working with its counterparts and regulators both onshore and offshore to bring these discussions to the forefront, he said, adding it requires patience.
LME Chief Executive Matthew Chamberlain said the LME has seen growth in its core business, and the potential for new products is exciting. He said 4,000 lots of gold and silver are traded per day through LMEprecious, with open interest for its contracts spanning to 3.5 years. He said this is a true bullion market on the LME.
During various panel discussions, speakers expressed their opinions and discussed hot issues such as the establishment of LME warehouses in Shanghai, development of the metals market amid the boom in electric vehicles, and the outlook for the market.
Chairman and CEO of Maike Metals Group He Jinbi said he is promoting the establishment of an LME warehouse in Shanghai during his tenure as a National Congress representative. He said the key to gain pricing power lies with participants. More than 90 per cent of LME’s trading is from institutions, while 90 per cent of China's trading is from retail investors.
He believes that LME warehouses in China should not be seen as simply benefiting the LME, as the underlying customers are all Chinese who now have to bear many unreasonable costs while they call for an LME delivery warehouse onshore.
LME delivery warehouses would enable China to participate in the global pricing mechanism and reduce the production, trading and transportation costs for the industry, which would also be conducive to the free trade zone in Shanghai.
The seminar also had some interesting surveys: 44 per cent of participants believe copper has the most upside potential for 2018; 39 per cent believe that apart from fundamentals, government policy has the most influence on the price of base metals; and 33 per cent believe that new energy will become the biggest trend in the development of the metals market in the next five years.
More than 2,000 metals professionals and media converged in Hong Kong for our largest annual gathering last week, LME Asia Week 2018. We had an enjoyable week filled with insightful discussions, interesting speeches, and great conversations with people from all over the world. Below are some highlights of the week.
15 May (Tuesday)
Side Event 1 – Precious Metals
Nearly 130 global precious metals market representatives from almost 20 countries and regions joined the precious metals seminar, which focused on the outlook for the gold market in 2018. Discussions were held on topics such as responsible gold sources and eco-mining, OTC and central clearing in the changing regulatory environment, as well as opportunities and challenges in the precious metals market. It was a great start to the week!
16 May (Wednesday)
Side Event 2 – Base Metals
Around 100 people attended the Base Metals side event on 16 May, where a guarded optimism about the market set the tone of the seminar. It looked at how the macroeconomic landscape is unstable, and the political uncertainty caused by friction in geopolitics and trade protectionism could eventually lead to increased volatility. Therefore, guest speakers reminded attendees that a hedging strategy is needed.
HKEX Chairman Laura Cha hosted a cocktail reception to welcome industry participants from all over the world to LME Asia Week 2018. We were also honoured to have the Secretary for Financial Services and the Treasury of the Hong Kong SAR Government James Lau join us for the event, the first time the annual reception has been held at HKEX Connect Hall.
17 May (Thursday)
LME Asia Metals Seminar
The premier event of LME Asia Week – the LME Asia Metals Seminar – attracted more than 700 people to the Hong Kong Convention and Exhibition Centre. The potential for a trade war between the United States and China, and how China can gain more influence to price global commodities were two hot topics at the seminar. Speakers shared their opinions and discussed other pressing issues such as the establishment of LME warehouses in Shanghai, development of the metals market amid the boom in electric vehicles, and the outlook for the market during various panel discussions. The audience was also involved in interactive sessions.
LME Asia Dinner
The largest LME Asia Dinner ever saw 1,900 prominent guests enjoy a remarkable evening with speakers and entertainment.
18 May (Friday)
LME Professional Training Course – Introduction to LME
On the last day of LME Asia Week, HKEX held a professional training course to help participants understand LME’s services and demonstrate how they can improve price risk management.
Side event 3 – Ferrous Metals
The Ferrous Metals Seminar was also held at HKEX Connect Hall on Friday morning. With HKEX and LME expanding into the ferrous space (HKEX TSI iron ore fines 62% FE CFR futures, LME Scrap Futures, LME Rebar Futures), speakers discussed the ferrous metals market outlook, physical market development, risk management strategies, global outlook and the evolution of commodity finance to about 100 attendees. The Ferrous Metals Seminar helped end the eventful week on a high note.