The London Metal Exchange (LME) said on Wednesday it will forge ahead with plans to support sustainable metal production starting with the roll-out by mid-2021 of a digital register to store carbon related details of aluminum.
The world’s oldest and largest market for industrial metals, which has been consulting with industry over how to support a transition to a low-carbon economy, is starting with aluminum because power is a major component – sometimes up to 40% – in the smelting process.
However, aluminum is also important for energy transition, including in the auto industry where it is valued for its lightweight properties.
“The roll-out of LME passport (digital register) will be a priority as it will provide the data which will form the basis of future access to sustainable metals via the LME’s proposed online marketplace,” the LME said.
LMEpassport will be rolled out gradually over three years for all the physically settled metals that trade on the exchange and require certificates of analysis.
The LME’s online platform to facilitate price discovery and trading of sustainably sourced metal will be launched in 2021.
“We are mindful of the diverse views of market participants, particularly in respect of our sustainable aluminum proposals,” said LME Chief Executive Matthew Chamberlain.
“This disparity highlights that greater industry coalescence around standards, definitions, and sustainability goals is the first step in overcoming the challenges facing our industry.”
The decision to go ahead with the register and trading platform comes after consultation with market participants.
The exchange said some respondents called for a separate low carbon aluminum contract while others were concerned that this could undermine liquidity for the existing aluminum contract.
“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.”
Mandatory disclosure of carbon details by metal producers will not be required. “However we do recognise the demand for such disclosures and the potential value of such a step, and will continue to assess stakeholder views,” the LME said.
The exchange will launch next year a cash-settled contract for aluminum scrap generated by the U.S. drinks industry, scrap steel contracts for Taiwan and India, and a lithium hydroxide contract.
(By Pratima Desai; Editing by Jane Merriman)