The LME's futures market complements the physical. Our functions of trading and price discovery are underpinned by a global network of approved warehouses and storage facilities as well as approved brands.
While delivery occurs in only a very small percentage of LME trades, the possibility of physical settlement plays a vital role in creating price convergence and ensuring our prices closely align with that of the physical spot market.
The LME market does not replace the normal channels for buying and selling material. Instead it can be used as a physical market of ‘last resort’ where producers and consumers can buy or sell metal in times of extreme shortage or over supply.
In June 2014 we published a discussion paper with TheCityUK and Deloitte on bonded warehouse development in China.
Read the China Free Trade Zone Warehousing paper.
A global network of warehouses
The LME network of approved storage facilities extends across 38 locations in 15 countries. Located in areas of net consumption and logistical hubs for the transportation of material, every location and warehouse company must meet strict criteria before being approved for LME delivery.
The delivery system relies on a user being guaranteed a specified quality of metal. The LME have very strict rules to ensure that every lot is of a certain quality and only LME-approved brands can be used to satisfy an outstanding contract.