London Metal Exchange explores sustainable metal premiums

The LME is engaging with physical market stakeholders on aluminium, copper, nickel and zinc.

By making a sustainability price differential public, the value attached to sustainable metals will be transparent and could support the development of the market for them, suggests the LME.

The Exchange believes the development of industry sustainability standards and accreditation through their LMEpassport and their work with Metalshub create an opportunity to establish these pricing premiums.

LME partnered with digital platform Metalshub to develop a price discovery mechanism for low-carbon nickel. 

Metalshub enables consumers to buy LME-grade, low-carbon nickel using an LME-prescribed carbon threshold assessed using the Nickel Institute methodology. Metalshub reports the monthly volumes transacted through the platform.

The LME says the proposals for the four metals (aluminium, copper, nickel and zinc) will now incorporate a more comprehensive set of criteria than carbon footprint alone and will be underpinned by 'robust assessment processes'.

Metal brands that meet such criteria would need to submit all their sustainability credentials via LMEpassport. Such metals could then contribute to the price discovery of the sustainability premiums via Metalshub's spot offering.

To enable the Metalshub transaction data to be published as a price premium, the LME is proposing to establish a pricing administrator whose role would be to use trading data and apply expert judgement to publish prices.

The administrator would set the rules, policies and process for the sustainability premia, and market participants would be able to engage with the administrator to raise issues or provide additional data.