The LME, together with Commodity Pricing and Analysis Limited ("CPAL"), its newly established HKEX Group sister company, has taken a further step toward publishing sustainable metal premium pricing for LME‑approved metals. The confirmed pricing methodology is now available on the new “LME Insight” website which will host all related news and pricing.
Key components for sustainable metals premium pricing
- LME brand list LMEpassport transparency
- Premium sustainability thresholds
- Approved Spot Trading Platform(s)
- Pricing administrator
LME Discussion Paper on Sustainable Metal Premium Pricing Methodology
The assessment of sustainable metals premium prices blends the LME-listed brand requirements, the disclosure transparency provided by LMEpassport and appropriate sustainability thresholds. LME Insight price administrators will leverage this existing framework (including executed transactions from Approved Spot Trading Platform(s), and Secure Bilateral Transaction Reporting to LME Insight, combined with market intelligence. Please visit LME Insight for more information.
Resources
LME Roadmap: Sustainable Metals Premia (PDF)
LME Discussion Paper: Sustainable Metal Premium Pricing Methodology (PDF)
Press Release: LME drives forward sustainable metal premium pricing plans
LME Insight Sustainable Metal Premium Pricing Methodology (PDF)
LME Sustainable Metal Premium Pricing Methodology Discussion Paper Response (PDF)
Press Release: ME Insight launch paves way for establishment of sustainable metal premium pricing
Sustainable aluminium
- Carbon footprint: 8 tonnes CO2-equivalent/tonne aluminium or below (per the International Aluminium Institute methodology[1])
- Third-party sustainability assurance: Aluminium Stewardship Initiative Performance Standard
[1]See: Aluminium Carbon Footprint Methodology - International Aluminium Institute
Sustainable copper
- Carbon footprint: 4 tonnes CO2-equivalent/tonne copper or below (per the International Copper Association’s methodology – Carbon Footprint of Copper Production: Best Practice Guidance for Greenhouse Gas Measurements[1])
- Third-party sustainability assurance: The Copper Mark[2]
[1]See: International Copper Association carbon footprint methodology.
[2]See: Copper, Nickel and Zinc Marks.
Sustainable nickel
- Carbon footprint: 20 tonnes CO2-equivalent/tonne nickel or below (per the Nickel Institute methodology) – as offered on the existing LME/Metalshub low-carbon nickel market[1]
- Future third-party sustainability assurance: The Nickel Mark[2]
[1]The LME notes the Nickel Institute position paperin respect of the comparability of nickel carbon footprint. Because the LME’s proposed approach would apply only to class I nickel, the LME believes that the issues in respect of the differences between nickel products are not problematic in this particular context. While the LME accepts that different producers may produce from various mineralogies, it believes that the Nickel Institute’s work on carbon measurement does allow these mineralogies to be assessed on an equal footing – and the LME’s 20 tonne carbon threshold has been deliberately chosen to avoid exclusion of any particular country or producer based on its particular ore availabilities.
[2] Future plan (once industry is ready to embed into the existing LME/Metalshub low-carbon nickel offering): given the relatively recent launch of The Nickel Mark, alongside certified brands, the LME is proposing to accept nickel producing sites that are in good standing i.e. they have signed a Letter of Commitment to the Copper Mark Assurance Process to participate in the process to obtain The Nickel Mark, asserting that they will complete the independent assessment within one year. The Letter of Commitment is Step 1 of the Copper Mark Assurance Process and is a public demonstration of a site’s efforts to work towards full The Nickel Mark award. This is a temporary measure to both support liquidity in the early stages of nickel premium discovery, and to help incentivise adoption in the industry, and will be reassessed in due course with the aim of raising the threshold to sites that have obtained The Nickel Mark only. Please note, all participating nickel brands will still need to be LME-listed brands, i.e. have met the LME’s responsible sourcing requirements.
Sustainable zinc
- Carbon footprint: At or below the average current carbon environmental footprint for special high-grade (“SHG”) zinc (3.5 tonnes CO2-equivalent/tonne zinc), estimated and regularly updated by the International Zinc Association[1] using the Zinc Carbon Footprint Guidance[2])
- Third-party sustainability assurance: The Zinc Mark[3]
[1]The current average was published in 2023 by IZA; updates may result in subsequent annual changes.
[2]See: International Zinc Association Guidance on calculating the carbon footprint for SHG zinc, following ISO 14040, ISO 14044, and Product Life Cycle Accounting and Reporting Standards by Greenhouse Gas Protocol.
[3]Given the relatively recent launch of The Zinc Mark, alongside certified brands, the LME is proposing to accept zinc producing sites that are in good standing i.e. they have signed a Letter of Commitment to the Copper Mark Assurance Process to participate in the process to obtain The Zinc Mark, asserting that they will complete the independent assessment within one year. The Letter of Commitment is Step 1 of the Copper Mark Assurance Process and is a public demonstration of a site’s efforts to work towards full The Zinc Mark award. This is a temporary measure to both support liquidity in the early stages of zinc premium discovery, and to help incentivise adoption in the industry, and will be reassessed in due course with the aim of raising the threshold to sites that have obtained The Zinc Mark only. Please note, all participating zinc brands will still need to be LME-listed brands, i.e. have met the LME’s responsible sourcing requirements.
Commodity Pricing and Analysis Limited (“CPAL”)
To support pricing for metal that meets premium sustainability thresholds, CPAL — a newly incorporated HKEX Group company based in Dubai — will serve as the independent price administrator.
Over the coming months, CPAL will establish its operations with the goal of publishing transparent premia based on transactions executed on Metalshub, supplemented where necessary by market intelligence from physical trades of qualifying metal.
Metalshub partnership
Metalshub is a leading provider of software for managing the physical buying and selling of raw materials. Customers use Metalshub’s solutions to streamline their purchases, sales and trading activity for ferrous, non-ferrous and minor metals, as well as scrap.
Any owner of metal meeting the premium sustainability thresholds outlined above (of an LME-listed brand, meeting the premium sustainability thresholds and credentials disclosed on LMEpassport) would then be eligible to trade on the Metalshub platform. The platform then allows buyers and sellers to agree trades for the sale and purchase of that metal, per the LME’s definition.
Who is the Metalshub platform for?
Broadly speaking, the Metalshub platform is for anyone who needs to procure, sell or trade metal. It provides producers, consumers and merchants with a transparent, easy-to-use way of buying and selling metal, underpinned by reliable transaction-based price discovery.
The platform also offers a host of additional features which provide analytics, the ability to manage counterparties, and access to the latest price data and news.
As a supply chain solution, Metalshub is distinct from a futures market, since it is designed to facilitate the physical transaction of materials, rather than to manage price risk as is the case with the LME’s core derivatives market.
Bringing the benefits of platform-based price discovery to the market
Raw materials worth billions of dollars are traded every year on Metalshub. Based on this trading activity, the platform already successfully discovers a number of prices for ferroalloys and metals, including a nickel briquette premium index. The nickel briquette premium index is a good example of the extensive work the LME and Metalshub have carried out with the market on qualifying different grades of nickel.
Another example is the lithium market where key market players take advantage of Metalshub’s platform-based price discovery.
You can find out more about the advantages of platform-based price discovery in our LME Digest article:
LME and Metalshub: Developing trusted commodity spot reference prices