Hong Kong Exchanges and Clearing Ltd. (HKEX), the Hong Kong-based owner of the London Metal Exchange (LME), has reported its year-end 2016 results, which include drops in both trading volume and revenue for the LME.
In a 50-page summary of its 2016 results, HKEX discloses that the LME’s $1.56 billion in revenue for the year was down by 10% compared with more than $1.73 billion in revenue in 2015.
The LME’s EBITDA (earnings before interest, taxes, depreciation and amortisation) declined by 19% from year to year, falling from $1.19 billion in 2015 to $963 million in 2015.
Trading activity, as measured by metals contract volume, declined by 8% on the LME in 2016 versus 2015. It dropped from 670 million tonnes under contract in 2015 to closer to 619 million tonnes in 2016. Trading in aluminium showed a larger volume and higher percentage drop compared with copper at 10% for aluminium to 6% for copper.
“2016 saw a continuation of 2015’s challenging market conditions, with a consequent reduction in volumes,” HKEX says in summarizing the LME’s 2016 results.
Regarding the LME’s 19% drop in profit margin, HKEX refers to the LME’s increased expenses, saying, “The increase was principally attributable to increased headcount for strategic initiatives (including product development and the establishment of a commodities trading platform in the [People’s Republic of China]), higher premises costs for new offices in London and [China] and also higher legal and professional fees incurred on strategic projects.”