The London Metal Exchange is set to approve the expansion of its global metals warehousing network into Hong Kong before the end of this year, three sources with knowledge of the matter said, opening the door to mainland China.

Registering warehouses in China, the world's largest consumer of industrial metals, to store metal traded on the LME has been a strategic aim since Hong Kong Exchanges and Clearing (0388) bought the LME in 2012 for US$2.2 billion (HK$17.08 billion).

Expanding into Hong Kong would mean a significant boost to LME trading volumes.

In a presentation made to the LME's warehousing committee last December, the exchange said companies in the region had indicated interest in Hong Kong as a place to store industrial metals as an alternative to the mainland. "An LME warehouse in Hong Kong could be seen as a showcase for in-depth cooperation between Mainland China and Hong Kong," the presentation said.

"The LME is actively exploring listing Hong Kong as an LME warehouse location, as part of our commitment to ensure we provide maximum global connectivity for the metals community," the LME said in response to a request for comment.

"The process for listing a new location in a new jurisdiction may take some time, but we are making good progress ... and we hope to be able to provide a more detailed update by the end of the year."

The LME has been working to identify sites that could rival those that have long benefited from proximity to China including Singapore, Malaysia and Taiwan - all are major storage locations of LME-deliverable metals.

Reuters

Malaysia is a major storage location for LME materials. Reuters

LME may expand warehousing to HK