By Pratima Desai
LONDON (Reuters) - The London Metal Exchange has plans to register warehouses that want to accept metal traded on the exchange by remotely checking they meet the criteria, should the need arise, the LME told Reuters on Tuesday.
Restrictions on travel due to government attempts to limit the spread of coronavirus have meant the exchange's approval teams in London and Singapore cannot physically check that the required conditions are met.
The virus has hit economic activity worldwide along with demand and prices for industrial metals such as copper
"The LME has contingency plans in place to enable warehouse listings to take place remotely – on a temporary basis – should it become necessary to do so," the exchange said.
"This will ensure that listings for additional warehouse space can still be considered, as long as supporting evidence can be provided to show that the warehouse meets the LME’s listing criteria."
According to the exchange's website, criteria include appropriate regulatory and fiscal systems. Locations must have good transport networks, the facility to store goods without payment of duty, and enjoy political and economic stability.
As a market of last resort, surplus metal would typically be sold on the LME and stored in its network of more than 550 warehouses in 33 locations across Asia, Europe and the United States.
"Demand is dropping, there will be more metal than is needed. People are worried there isn't going to be enough space to store the excess because LME inspectors can't fly," one copper trading source said.
"But (the LME) is proposing remote approvals using pictures, videos and floor plans. As soon as travel restrictions are lifted, the inspectors can go out and make physical checks."
Metal entering the LME's global storage network is issued with a title document known as a warrant. Metal "on LME warrant" during times of economic trouble is easier and cheaper to finance than metal not on LME warrant.
The 143-year-old LME is owned by Hong Kong Exchanges and Clearing (HK:0388).