London Metal Exchange plans to introduce inexperienced metals premium | USAEMALL.com

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

The London Metal Exchange is drawing up plans for a so-called “green premium” on metals that are mined sustainably, following industry pressure to distinguish them from “dirty” supplies with a larger environmental impact.

The exchange, the world’s largest marketplace for metals, said on Wednesday that there was sufficient support among market participants to explore launching ways to buy aluminium, copper, nickel and zinc that had been mined sustainably.

The exchange, which was founded in 1877, said it was proposing allowing traders to buy certified green metals via Metalshub, a trading platform with which it has an existing partnership.

The LME’s proposals “will unlock the value attached to sustainability and have the potential to drive the development of the market for more sustainable metals”, said chief executive Matthew Chamberlain.

Global mining companies have been calling for the exchange to introduce a green premium to distinguish, for instance, nickel they produce from allegedly “dirty” supplies from Indonesia, which environmental groups have claimed caused forestry loss, mining waste pollution and high carbon emissions.

However, there has been limited appetite among buyers, such as carmakers, to pay more for more responsibly sourced metal. Last year the LME said the market for green nickel was “not yet large enough to support vibrant trading in a dedicated green futures contract”.

Even so, the exchange launched a partnership with Metalshub allowing traders to buy green nickel for immediate delivery. Just over 400 metric tonnes of “low carbon nickel” has been traded on Metalshub since March 2024 — in an overall nickel market of millions of tonnes.

Under the LME’s plans announced on Wednesday, traders will be able to purchase green aluminium, copper, nickel and zinc for immediate delivery. The exchange sees this as a way to gauge the appetite of metals buyers to pay more for sustainable commodities, in a step towards the possible launch of green futures contracts on the LME.

The exchange said it wanted to establish a “pricing administrator” that would publish sustainability premiums and set rules on green metals. The new plans will make use of a variety of industry sustainability standards that metals producers need to meet in order to have their products classified as green.

They include the carbon emissions methodologies developed by industry bodies the Nickel Institute, the Copper Association and the International Aluminium Institute.

Compliance with the rules would have to be assured by certain third parties — the Copper Mark, the Aluminium Stewardship Initiative Performance Standard and The Zinc Mark.

But that would not immediately be required for the nickel market, because the existing green product on Metalshub was “gaining traction as a low-carbon product” and it was “appropriate to respect the original specification” in the short term, the LME said.