Welcome address by Minister Lim Hng Kiang, Minister For Trade and Industry (Trade) at the LBMA/LPPM Precious Metals Conference 2016

WELCOME ADDRESS BY MINISTER LIM HNG KIANG, MINISTER FOR TRADE AND INDUSTRY (TRADE) AT THE LBMA/LPPM PRECIOUS METALS CONFERENCE 2016, AT SHANGRI-LA HOTEL ON 17 OCTOBER 2016, MONDAY, 9.15AM

Mr Grant Angwin and Mr Paul Fisher, Co-Chairmen of the London Bullion Market Association (LBMA),

Mr Tim Pearce, Chairman of the London Platinum and Palladium Market (LPPM),

Distinguished Guests,

Ladies and Gentlemen,

1.            Good morning. It is my pleasure to join you at this conference.

Outlook for the Precious Metals Industry

2.            The global commodity market is going through a challenging time. Global prices for many traded commodities have come down significantly in the last two years, and remain depressed. Amidst this challenging environment, the precious metals industry has remained relatively resilient. This is due to the continued importance of precious metals as a physical store of wealth, and as a hedge against inflation. Gold for instance has had a bull run in the first half of this year.  According to the World Gold Council, gold price rose 25% from January to June in 2016, the largest half-yearly increase since 1980.

3.            The resilient demand for gold and other precious metals is most evident in Asia. In 2015, Asia accounted for two-thirds of global gold demand, of which more than half was attributable to India and China[1]. From now through 2020, consumer demand for gold in Asia is expected to grow by a healthy 6% per annum on average[2]. This is supported by the rise of the middle class and growing affluence in the region. In the long run, Asian demand will remain the key driving force behind the growth of the global gold market. 

4.            To effectively tap on the demand potential in Asia, it is important for businesses to be located in an Asian city that offers a conducive business environment, supported by a strong rule of law, world-class financial institutions and a global talent pool. Singapore excels in all these aspects.

Developments in Our IPM Sector

5.            Our Investment Precious Metals (IPM) sector has benefited from Asian opportunities. Since removing the Goods & Services Tax on investment precious metals in 2012, we have witnessed growth across the entire precious metals value chain, including refining, secured logistics and trading. In 2015, the physical volume of gold traded in Singapore was about 5 times the amount in 2012[3].  Over the same period, employment in the sector has doubled to more than 280 jobs[4].

6.            Take the example of Metalor Singapore. Since commencing its operations in 2014, Metalor has grown into the largest LBMA Good Delivery refinery in Southeast Asia. Riding on abundant regional scrap supply and healthy bullion demand, Metalor has quadrupled its production to more than 100 tonnes in 2015[5]. This year, Metalor invested in additional refining and production equipment to increase its capacity and better serve its customers.

7.            We have also seen an increase in the number of precious metals trading companies in Singapore. These include international players from China, India, Thailand and the US. INTL FCStone and Edelweiss are two notable examples. Riding on opportunities in the IPM sector, our home-grown companies such as Philip Futures and Soo Kee Group have also expanded their trading presence in Singapore.

8.            Meanwhile, the development of our secure logistics sector has also supported the physical movement of precious metals, anchored by companies such as Brinks, Malca Amit and Certis Cisco. In 2015 alone, the physical movement of gold arranged from Singapore has risen by 65%[6] to over 200 tonnes.

9.            Our very own Singapore Bullion Market Association (SBMA) has grown with strong support from IE Singapore. Going forward, SBMA will build up its regional networks and help members access business opportunities in new markets. SBMA serves as the point of contact for foreign precious metals businesses seeking to establish a presence into Singapore. I encourage you to engage them regarding your ventures here.  

Joint Feasibility Study on the LBMA Pre-AM Gold Price

10.         One of SBMA’s priorities is the development of a gold price discovery mechanism for Asian business hours. Given Asia’s growing importance as a source of demand for gold, it has become increasingly paramount for gold price to be set in Asian business hours, allowing traders to reduce their exposure to intraday price volatility and overnight foreign exchange risk.

11.         To address this gap, LBMA, SBMA and the ICE Benchmark Administration (IBA) will be launching a joint feasibility study on the development of “LBMA Pre-AM Gold Price at 2pm Singapore Time”. This is an important first step towards establishing a US dollar price discovery mechanism for gold during Asian business hours. When in place, it will facilitate the timely tracking of Asian demand and allow participants in Asia to settle their trades within the same business day.

Conclusion

12.         Singapore is quickly developing itself into a leading bullion hub in Asia.  We are confident that Singapore will continue to serve as the preferred location for businesses looking to access Asian markets. Conferences like this are important platforms for global players in the precious metals industry to expand their network and exchange views on the latest industry developments.

13.         On this note, I wish you a meaningful and engaging conference ahead and a pleasant stay in Singapore for our foreign guests.

14.         Thank you.

[1] Source: World Gold Council

[2] Source: Euromonitor

[3] Source: SBMA Survey 2016

[4] Source: SBMA Survey 2016

[5] Source: Metalor Singapore

[6] Source: SBMA Survey 2016. Data is only available for 2015.