LME sticks with sustainability plans

The London Metal Exchange (LME) says it will move ahead with its sustainability strategy and the introduction of new scrap metals contracts after receiving “broad support” during a feedback gathering stage.

The LME’s sustainability strategy “hinges on providing metal market participants with the option for greater transparency and access in respect of sustainably produced metal and metal that itself plays a significant role in global decarbonization and the circular economy,” states the commodities exchange.

Four new LME contracts will be launched in 2021. A contract for lithium hydroxide has been designed to provide pricing and access to metals that support the electric vehicle (EV) market, says the LME. The other three—for aluminum scrap in the United States and ferrous scrap in India and Taiwan—are recycling-related.

The initial focus of the LME’s sustainability “passport” plans will be aluminum, and the exchange says it sought feedback from that market segment in particular. “While some respondents felt the LME should go further and introduce a separate low-carbon aluminum contract, others were concerned about the impact this could have on the LME’s primary aluminum futures contract,” the LME states. “While the LME understands the drivers for both of these positions, it continues to believe the market is not yet in a position to be able to adequately support a second contract, and changing the requirements of its existing contract would oppose the optionality upon which its strategy is premised.”

Matthew Chamberlain, the LME’s chief executive, comments, “We are grateful for all the feedback we received as part of the discussion process. We are mindful of the diverse views of market participants – particularly in respect of our sustainable aluminum proposals. This disparity in views highlights that greater industry coalescence around standards, definitions and sustainability goals is the first step in overcoming the sustainability challenges facing our industry, and our strategy considers the building of such consensus as a primary focus.”

The LME’s planned launch of a digital credentials register it is calling LMEpassport received strong support, says the exchange. The new passport system has been designed to allow verified sustainability credentials to be disclosed on a voluntary basis and in accordance with a set of agreed sustainability categories, according to the LME.

Starting with aluminum in 2021, LMEpassport will be rolled out gradually over three years to those of the LME’s physically settled metals requiring certificates of analysis (CoAs). According to Miriam Heywood of LME Press Office, “All of the LME’s physically settled contracts with the exception of copper require CoAs. However, on background - that is not to say that copper couldn’t be included in the scope should market participants wish to register copper sustainability credentials.” That list of settled contract metals after aluminum and copper includes nickel, tin, lead, zinc, cobalt and aluminum alloys.

The LME says feedback it received asked for “solutions allowing comparability between disclosures on two important topics: carbon footprint and recycled content.” The LMEpassport approach, says the exchange, will facilitate disclosure under existing standards, and its data model will capture both the quantitative data as well as the methodology used to calculate that data. “This will then allow far easier comparison across metals brands,” states the exchange.

“We received some extremely helpful feedback that we’ve taken on board in respect of the types of sustainability disclosures, certifications and validations we should be supporting initially in the roll-out of LMEpassport and by extension our online marketplace,” says Georgina Hallett, the LME’s chief sustainability officer. “Since we are committed to providing optionality in the first instance, we will not introduce any mandatory disclosure requirements. However, we do recognize the demand for such disclosures and the potential value of such a step and will continue to assess stakeholder views as we broaden the scope of our new platforms to include additional metals markets.”

The LME also indicates it received “broad market support” for its decision to delay the four new contracts from being launched in 2020 “given market conditions in light of the pandemic.”