In collaboration with a broad group of warehouse operators, physical commodity traders and financing banks, the LME has developed LMEshield to manage warehouse receipts in multiple countries.
This alliance focuses on the use of LMEshield in Belt and Road jurisdictions. In the first phase of the project, Henry Bath will list one of its warehouses as an LMEshield facility along the 21st Century Maritime Silk Road, with the support of CMST. Metal receipting and support will be provided by Mercuria. China Merchant Securities supports commodities financing in LMEshield locations along the Belt and Road routes.
"The infrastructure projects stimulated by China's Belt and Road strategy have created significant demand for base metals and other commodities. This LMEshield initiative reinforces the LME's position as a conduit for trade flow between China and the rest of the world," says Garry Jones, CEO of the LME.
LMEshield offers electronic transfer, pledging and administration functionalities to owners of commodities and off-warrant metal that exist outside the LME network. The new system is intended to reduce the risks around commodity financing and is underpinned by the LME's experience overseeing a global metals warehousing network.
"An initiative that will enhance confidence in the off-warrant market, strengthen global commodity financing risk management and improve overall efficiency for our clients is very welcome indeed. As such, we fully support the LMEshield initiative," says Graham Hawkins, Group General Manager of Henry Bath & Son Ltd.
"CMST appreciates LME's response and support to the One Belt and One Road initiative. The ability to set up foreign exchange delivery warehouse in China is confronted with regulation constraints, so LMEShield has presented a good alternative in the context of this regulation for Chinese players to participate in the system of LME. LMEShield, built on the reputation and experience of LME, will bring a boost to the OBOR initiative and lend great confidence to the metals community, especially to financing banks in light of recent metals financing frauds. It provides another tool for banks and other metals community participants to manage credit risks." said Mr Han Tielin, the Chairman of CMSTD Ltd.
In phase two of the project, the parties will identify a country along the Silk Road Economic Belt route ¬in which to locate a new LMEshield warehouse.