By Jonathan Saul
LONDON, Nov 4 (Reuters) - Financial technology firm essDOCS has launched an electronic system for tracking material stored in warehouses similar to one being tested by the London Metal Exchange, aiming to build take up by users of its other products, its chief executive said.
The LME, owned by Hong Kong Exchanges and Clearing Ltd 0388.HK , announced this week it will launch a one-year pilot scheme using its electronic system, LMEshield, to track material stored in China outside its warehouse network. provides electronic receipts as proof of ownership for stored material. It was developed in response to requests from the metal industry and banks which finance metal after the storage scandal at China's Qingdao port more than two years ago.
In recent years privately-owned Malta headquartered essDOCS has become a leading global provider of electronic documentation for shipping and trade finance markets.
CEO Alexander Goulandris said it was moving into electronic documentation for warehouses and "can compete with LMEshield".
"There is nothing stopping someone who has cargo stored in an LME warehouse asking the warehouse to issue a hold certificate on our platform. In some ways, we are a challenger," he told Reuters.
Impala Terminals, the logistics and warehouse unit of Swiss commodities trader Trafigura, said in June it had used essDOCS electronic warehouse documentation at its metals terminal in Huelva in Spain. It declined further comment when contacted.
An industry source familiar with the matter said Anglo-Australian miner Rio Tinto 's RIO.L RIO.AX mine in Mongolia had done a couple of transactions using essDOCS for copper deliveries with a customer.
Goulandris said essDOCS aimed to build more scale via its one-stop-shop approach.
"The complexity of multiple logins and using different platforms eradicates the benefit of digital solutions," he said.
LMEshield could offer a back-door route into mainland China where the LME is currently not permitted to register warehouses.
Goulandris said essDOCS was providing electronic hold certificates outside of the LME as well as its own non-LME electronic warehouse warrants.
"If you have a warehouse keeper who ... does not put the controls around how they manage documentation, adding LMEshield to that is not going to solve your problem," Goulandris said.
"You can, with the right number of people, create fake electronic warrants. For an electronic hold certificate or an electronic warehouse certificate to significantly reduce risk, you need the control mechanism and the comfort with the warehouse keeper and their processes."
Goulandris said they were looking to provide warehousing warrants for plants in Peru and Mexico, declining further details at this stage.
"Outside of LME, there are some major warehouse keepers issuing non-LME documentation and we are advanced talks with them," he added.
essDOCS' other products have gained traction since 2010, including among 32 banking groups and commodities such as Cargill CARG.UL and Louis Dreyfus AKIRAU.UL .
Westpac Banking Corp WBC.AX , one of Australia's four major banks, said it was using essDOCS for electronic trade finance documentation, declining to comment on potential warehousing products.