Exclusive-State-backed Shanghai Port in talks to buy LME warehouse firm, sources say

Shanghai Port in Talks to Buy LME-Approved H&M Metal Warehousing

Shanghai International Port Group's Potential Acquisition of H&M Metal Warehousing

By Pratima Desai

Overview of the Negotiations

LONDON, Oct 12 (Reuters) - State-backed Shanghai International Port Group is in talks to buy London Metal Exchange-approved warehousing firm H&M Metal Warehousing with Chinese government approval, two people familiar with the negotiations told Reuters.

The acquisition would further boost the presence of China, the world's largest consumer and producer of industrial metals, within the trading infrastructure of the LME, the world's largest and oldest forum for industrial metals.

China has been pushing to win a bigger slice of revenue made from global metals trading, with Reuters reporting that three major players on Shanghai's main metals bourse are expanding into LME trading. 

The sources said discussions for SIPG to acquire H&M were ongoing, and may or may not result in a deal. H&M and SIPG did not respond to requests for comment.

A valuation for H&M is not available, as it is a privately owned company in Singapore.  

Strategic Importance of the Acquisition

Data as the Chief Draw

DATA THE CHIEF DRAW OF ACQUISITION, SOURCES SAY

SIPG, which is controlled by the Shanghai municipal government, operates the world’s busiest port by container volume.

Metals warehousing typically is a low-margin, low-value business, but SIPG is chiefly seeking the information that comes with owning a warehouse, both the people said.

That data, on metal flows between countries and companies, can offer insight into the fundamentals of a market and trading activity, they said.

Chinese Presence in LME Warehousing

The only other Chinese presence in LME warehousing is China's CMST, which has a 51% stake in Henry Bath.

H&M Metal Warehousing was approved by the LME in 2010, according to its website. It is registered to operate warehouses to store metal on LME warrant — title documents that confer ownership — in Asian locations.

Previous Acquisition Attempts

The Shanghai port group had also approached Italy-headquartered PGS Global Logistics, another LME-registered warehouse firm, months ago without success, both people said. PGS declined to comment. 

Implications for LME Warehousing

Approval Process for LME Warehouses

If an LME-approved warehouse company is bought by a logistics firm that itself has no prior LME approval, the warehouse operation typically does not have to go through the exchange's approval process again from scratch.

LME Ownership Structure

The 149-year-old London exchange is owned by Hong Kong Exchanges and Clearing Ltd.

Reporting and Editing

(Reporting by Pratima Desai; Editing by Veronica Brown and Jan Harvey)