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Introduction |
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The origins of the London Metal Exchange
(LME) can be traced back to the to the opening of the
Royal Exchange in London in 1571, where traders in metal
met on a regular basis. Initially the deal was limited
to Britain, but from the early 19th Century, the tradition
of "Ring" was born, and the LME market started
to take off in earnest. Currently LME provides the function
of hedging and pricing of non-ferrous metals in addition
to delivery and warehousing, and it plays a pivotal
role in the pricing of non-ferrous metals. In November
2001, Korea became the twelfth nation in the world to
conduct LME operation and in October 2002, GEL began
to operate LME-approved warehouses in Korea. |
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LME Functions |
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(1) Price discovery |
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. The
LME determines the price of non-ferrous metals based upon
orders submitted to the Exchange ...and
publishes the daily metals price. |
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(2) Hedging |
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.LME
provides an opportunity for primarily non-ferrous base
metals-related industries including
...mining,smelting and trading
companies to protect against risks from fluctuations in
the base
.. metal prices.
...This hedging function
is one of the most important function of the Exchange
since its founding. |
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(3) Supply & Demand |
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.LME
helps the non-ferrous base metal industry to maintain
a stable production of metals, through
...warehousing of excess
metals during a bear market, in addition to providing
cash to the metal
...producers for the warehoused
metals.
...Further, metal "futures
market" investors can profit from buying metals stored
in the LME warehouse. |
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(4) Delivery |
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.Although
initially the LME contract was limited to "futures
market exchange" transaction, its business
...scope was expanded to
the delivery function whereby end-users could be readily
supplied.with the
...metals of certain quality
and standard when they need it. |
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How Global Enterprises, Ltd. LME warehouse
operation benefits the local industry and nation |
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Korea 's self-sufficiency of non-ferrous metals is below
50% and in case of aluminum where annual demand exceed
one million tons annually, it has all been imported 100%,
incurring huge logistics cost. However with the operation
of the LME warehouse, local manufacturers can now get
timely supply of metals, resulting in lower inventory
cost and cut in the logistics cost assuring stable operation
of plants. Further, with the supply of metals to the Government
Procurement Office which assumes a pivotal role in the
supply of materials to the defense contractors and the
local industry; the local LME authorized warehouse plays
a important role in the support of their local industry. |
