Hong Kong's Lee Kee sees potential for possible spot HKEx metals market

Lee Kee Holdings

07/04/2016 06:15

By Polly Yam 
    HONG KONG, April 7 (Reuters) - Hundred of thousands of 
small- and medium-sized factories in China may use a spot 
commodity platform that Hong Kong Exchanges and Clearing is 
considering building, said the head of one of the biggest metals 
merchants in Hong Kong. 
    Clara Chan, Chief Executive Officer of Lee Kee Group 
 0637.HK , which is a member of HKEx  0388.HK  subsidiary the 
London Metal Exchange and which owns a brokerage firm, said 
factories could use the platform as they look to diversify 
supply channels for raw materials. 
    She also said they could use it for hedging their exposure 
to fluctuations in prices for metals such as copper, aluminium, 
nickel or zinc. 
    HKEx said last month it would explore the possibility of 
creating a platform for spot commodity trading in China 
supported by warehousing, as a way of getting the LME's 
expertise into the world's top metals consumer. It did not give 
a timeframe for the launch of the platform.  urn:newsml:reuters.com:*:nL8N16A2EH 
    Lee Kee shipped about 120,000 tonnes of metals in the 
2014/15 fiscal year to mostly small- and medium-sized factories 
in mainland China and Southeast Asia for the auto, toy, 
furnishing and construction sectors. The company also operates a 
zinc alloy production plant in China.  
    "We have served physical, end-users (of metals) for a long 
time. We believe (they) have the potential for the (HKEx) spot 
market," Chan told Reuters at an interview on Tuesday. 
    She said the lot size for trading on the HKEx spot platform 
should be small with a supply network close to end-users.  
    HKEx should conduct thorough research on end-user needs, and 
provide training after the platform is established, she said.  
    "Factories are conservative, they won't do what they don't 
understand." 
    Lee Kee became an associate LME trade member in 2014, which 
Chan said was prompted by HKEx buying the LME in 2012, boosting 
the prospects for commodity trade in Hong Kong.  
    Its unit Promet Metals Testing Laboratory became one of 
seven laboratories approved by the LME for sampling and assaying 
this year. The unit could support the proposed HKEx spot 
platform in testing metals for delivery, Chan said.   
    The company's brokerage arm, Horizon Commodity, also started 
dealing in mini LME metal contracts in Hong Kong last year. 
    Chan, whose great grandfather set up Lee Kee in 1947 and who 
has traded with small metals end-users over 20 years, said many 
small- and medium-scaled factories in China were still 
struggling with a cash-crunch and waning demand amid the slowing 
economy. 
    She said some were trying hard to upgrade their facilities 
and improve product quality in a bid to survive. 
    LME copper prices  CMCU3  will likely stay weak for much of 
this year, while zinc prices  CMZN3  will benefit from supply 
cuts, Chan added. 
 
 (Reporting by Polly Yam; Editing by Joseph Radford) 
 ((polly.yam@thomsonreuters.com; +852 2843 6933; Reuters 
Messaging: polly.yam.thomsonreuters.com@reuters.net)) 
 
Keywords: METALS LME/HONGKONG