Nanhua Futures opens subsidiary in Britain

Leading Chinese broker Nanhua Futures Co Ltd launched a British subsidiary on Wednesday, aiming to connect Chinese metal companies with the world's oldest metals trading market, which is located in London.

Nanhua has applied to become a member of the 141-year-old London Metal Exchange. After it becomes a member, Nanhua will be able to assist Chinese metals producers and users to trade with their international counterparts.

Luo Xufeng, president of Nanhua Futures, said establishing Nanhua Financial UK was "a big step towards the global market" for the company.

"London is one of the most significant financial centers throughout the entire world and LME is the largest nonferrous metal exchange in the world. We believe Nanhua Financial UK will mature by working closely with LME," Luo said.

Matthew Chamberlain, CEO of the LME, welcomed the launch, noting Chinese brokers create an important bridge between the LME and China's vast metals market.

Nanhua's UK expansion follows similar moves by other Chinese financial enterprises. Bank of China International became the first Chinese member of the LME in 2012, followed by China Merchants Securities, ICBC Standard Bank, GF Financial Markets and CCBI Metdist.

The flurry of Chinese participation in the LME coincides with a push by Chinese metals companies to gain greater pricing power in the international industry, meaning they can secure more profitable prices.

Although China consumes about 40 percent of the world's metal supplies, Chinese companies, so far, have very little pricing power over international metal trading prices, because most have historically traded metals with their counterparts directly rather than via commodity exchanges.

Recognizing this issue and mobilizing to secure better prices, Chinese metals producers and users have started to trade through brokers on international exchanges, including the LME. This trend has attracted the likes of Nanhua to establish UK operations.

Despite the massive opportunities available, as newcomers, Nanhua and other Chinese brokers could still find it difficult to establish a pool of clients.

"We will look into opportunities to trade via Chinese brokers like Nanhua, because it is easier to communicate with Chinese brokers but, ultimately, we will go with whichever broker can secure the best price for us," said Alan Mao of Shanghai Haicheng Resources. His company started trading on the LME via Western brokers before the exchange had any Chinese members.

Nanhua Futures was founded in 1996 in Hangzhou, Zhejiang province and is an active participant in China's major domestic exchanges, including the Shanghai Futures Exchange, the Zhengzhou Commodity Exchange and the Dalian Commodity Exchange.

It has also established overseas subsidiaries in Singapore and the United States, to participate in international commodities exchanges and better connect its China-based clients with their international counterparts.