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Benefits

Members of the global metal community can benefit from managing their price risk on the LME to achieve a variety of solutions:

  • Protection against price movements
  • To offer long-term fixed price sales and lock in a margin
  • Improve budget forecasts of costs and profits
  • Turn inventory into cash or security for finance.

Using the LME also offers the opportunity to:

  • Access a transparent reference price for use in physical trade negotiations
  • Provide additional services to customers to gain a competitive edge
  • Protect physical inventory against a fall in price
  • Swap physical material on a location and brand basis 
  • Access the Exchange’s delivery mechanism as a source of material in times of extreme shortage, and as a channel to sell in times of surplus.

 

Producer benefits


LME contracts offer a number of benefits for producers, including the ability to:

  1. Offer a long-term fixed sales price and lock in a profit margin
  2. Use inventory financing and trade financing
  3. Access lower financing cost (banks view companies that hedge as lower risk)
  4. Protect the value of unsold inventory in a falling market
  5. Hedge physical purchases in times of strong demand.

The entire supply chain benefits from a transparent and accurate pricing mechanism.

Merchant benefits

LME contracts offer a number of benefits for merchants, including the ability to:

  1. Hedge physical sales and purchases
  2. Offer a long-term fixed sales price
  3. Swap physical material on a location and grade/producer basis
  4. Gain a competitive advantage by offering a fixed sales price
  5. Protect the value of physical stock against a fall in price
  6. Bring over-the-counter (OTC) transactions on Exchange.

The entire supply chain benefits from a transparent and accurate pricing mechanism.

Consumer benefits

LME contracts offer a number of benefits for consumers including the ability to:

  1. Lock-in a forward purchase price 
  2. Accurate budgeting for raw material requirement costs
  3. Increased ability to commit to future sales prices

The entire supply chain benefits from a transparent and accurate pricing mechanism.

Scrap dealer benefits

LME contracts offer a number of benefits for a scrap recycler, including the ability to:

  1. Protect against price movements
  2. Offer long-term fixed sales price and lock in a profit margin
  3. Hedge the timing difference between scrap purchase and sale

The entire supply chain benefits from a transparent and accurate pricing mechanism.