LME considering aluminum scrap contract
The LME is reportedly considering contracts that can be pegged to more environmentally friendly aluminum production.
Photo by Brian Taylor.

LME considering aluminum scrap contract

Exchange trading platform reportedly also plans low-carbon aluminum contract.

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June 8, 2020

The London Metal Exchange (LME) reportedly is planning new contracts for low-carbon emissions aluminum and for aluminum scrap.

A six-paragraph June 5 Reuters item indicates the low-carbon LME contract is being designed to help aluminum users source “low-carbon aluminum, which is typically produced with hydropower or other forms of renewable energy.”

That contract could help producers meet sustainability goals, and possibly avoid over-reliance on primary aluminum made in China. According to Reuters, about half of global primary aluminum supply “is produced in China, where power is mostly generated by coal-fired plants.”

The same news item reveals the LME also is planning to launch a contract for aluminum scrap. That contract also could have a sustainability peg, since aluminum “can be recycled using a fraction of the electricity of creating new metal,” says Reuters.

The aluminum industry has long touted recycling as an energy-saving technique, sometimes using a figure of 95 percent energy savings compared to the mining-to-finished aluminum production chain. That factoid has left some recyclers wondering why scrap and secondary alloys do not trade at more of a premium to prime product, since the energy savings they provide should offer a significant margin.