LONDON - The London Metal Exchange (LME) is set to approve the expansion of its global metals warehousing network into the Hong Kong Special Administrative Region before the end of this year, three sources with knowledge of the matter said, opening the door to the Chinese mainland.

Registering warehouses in China to store metal traded on the LME has been a strategic aim since Hong Kong Exchanges and Clearing (HKEx) bought the LME in 2012 for $2.2 billion.

Expanding into HKSAR would mean a significant boost to LME trading volumes.

"The LME is actively exploring listing Hong Kong as an LME warehouse location, as part of our commitment to ensure we provide maximum global connectivity for the metals community," the LME said in response to a request for comment.

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"The process for listing a new location in a new jurisdiction may take some time, but we are making good progress ... and we hope to be able to provide an more detailed update by the end of the year."

Since announcing this potential development in LME Asia Week, the LME has received very positive feedback from Hong Kong logistics companies and other stakeholders.

One source with knowledge of the matter said the LME was working with HKSAR authorities on metal warehousing space at the port, "as a temporary measure".

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Three sources said the exchange had been looking at a number of sites further inland in the city's New Territory area.

Some zinc and copper producers in Southern China have shown interest in storing metal in the SAR, a second source with knowledge said.

The second source said some locations in New Territories could be used for warehouses at a "reasonable cost", but some infrastructure including roads will have to be constructed.

A third source said the LME wants its registered warehouse companies to subcontract local firms.