The port was chosen for its proximity to steel mills on the southeast coast of the United States and is aimed at expanding the steel contract's footprint in North America even as domestic steel mills continue to resist using the futures market for hedging.
The possibility of designating the South Carolina port the exchange's fourth bonded-storage location in the United States will be discussed at the board's next meeting, which is expected by the end of November.
"We're working on plans to expand delivery to Charleston. The southeast of the States is very important for the steel market in the USA and we need to be part of that," Evans said.
"We've had early talks with the port at Charleston about setting up bonded warehouses there."
South Carolina is a logical location given Commercial Metals Co's presence there, a steel trader told Reuters.
The steel maker is one of three U.S. companies to have their billet approved as an LME brand for delivery into warehouses.
Warehousing companies are likely to assess whether to set up facilities at the port after board approval.
NEMS Ltd founder and managing director Charles Bucknall said he would consider adding Charleston to the company's other US LME-bonded storage locations in New Orleans, Baltimore and Chicago.
"We're interested in looking at any location. The decision is taken on its merits," he said. NEMS is owned by Trafigura, which has been building up a presence in steel trading in addition to its steel raw materials operations.
Some warehousing companies may be hesitant to set up storage facilities in the southeast coast port after a massive cancellation of warrants across global locations, particularly in the United States and Malaysia, at the end of August.
That has created caution about investing in new operations for fear that material will not be stored for long periods of time.
"It's a dead duck at the moment," a source at a major warehousing company said when asked if he would look at Charleston for a facility.
Warehousing companies were frustrated by the cancellations, which accounted for the majority of LME steel stock, as it results in the delivery out of the material and therefore the loss of rent. For such a young contract, it was particularly galling for warehouses which had offered freight incentives for steel to be delivered into locations, in particular New Orleans.
The LME downplayed warehouses' hesitancy.
"These are long-term investment decisions that should not depend on the short-term mood of any particular market," Evans said. He pointed to rising deliveries of material into U.S. warehouses since August, which "underscores the importance of the market and demonstrates that other parties are using it than the one taking metal out."
Charleston would be the LME's 13th location and its fourth in the United States after New Orleans, Chicago and Detroit. (Reuters)
