Metal Industry suggests LME to focus on enhancing services instead of creating a separate low carbon aluminium trading platform

According to a Reuters report, the metal industry sees no need for a separate platform on the London Metal Exchange (LME) to trade low carbon aluminium. The industry thinks the exchange should focus on services instead that users need more urgently, such as euro-denominated steel contract.

Last month, LME outlined its plans for a spot trading platform for low carbon aluminium with a view to support sustainable metal production and sought feedback from the metal industry. A few industry sources, on the condition of anonymity, said the market had the tools needed for consumers willing to pay a premium for sustainable metal.

“LME contracts give you a basic price. If you have additional requirements - location, producer, shape of metal, warehouse company - there will be premiums to pay,” a consumer source said.

The source also said, “Buyers can ask for green aluminium and pay extra, you don’t need a new platform. (The LME) should be concentrating on things like the euro-priced steel contract.”

A metal broking source said, “We still don’t have a euro-priced contract which the industry geared up to use,” while adding, “On sustainability, they should let the market decide.”

Aluminium produced by Norsk Hydro NHY.OL and Russia’s Rusal 0486.HK is considered low carbon as it is smelted with hydropower instead of fossil fuel. This aluminium is largely used in construction, transport, and packaging.

One industry source said the LME might be worried about the impact of a separate green aluminium contract, which would explain its preference for a physical platform.

“They have to be careful, they don’t want to split liquidity. The LME’s aluminium contract is one of the most liquid in the metals world.”

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