The London Metal Exchange does not need a separate platform to trade low carbon aluminium and should focus instead on services its users need more urgently, such as a euro-denominated steel contract, metal industry sources told Reuters.
As pressure mounts on investors and companies to prove their activity does not harm the environment, the exchange last month outlined plans to support sustainable metal production with a spot trading platform in the first half of 2021 for low carbon aluminium.
Ahead of a Thursday deadline for feedback, industry sources who asked not to be named said the market had the tools needed for consumers willing to pay a premium for sustainable metal.
“LME contracts give you a basic price. If you have additional requirements – location, producer, shape of metal, warehouse company – there will be premiums to pay,” a consumer source said.
“Buyers can ask for green aluminium and pay extra, you don’t need a new platform. (The LME) should be concentrating on things like the euro-priced steel contract.”
The LME said by email it looked forward to considering all market feedback.
Aluminium produced by Norsk Hydro and Russia’s Rusal is viewed as low carbon as it is smelted with hydropower, rather than fossil fuel.
It is used in construction, transport and packaging.
Last year, the LME launched a suite of cash-settled contracts including hot rolled coil steel for North America and China.
But plans for a European steel contract were postponed because Europe prices steel in euros and the exchange’s clearing house was designed to only clear dollar-based contracts.
“We still don’t have a euro-priced contract which the industry geared up to use,” a metal broking source said.
“On sustainability, they should let the market decide.”
One industry source said the LME may be worried about the impact of a separate green aluminium contract, which would explain its preference for a physical platform.
“They have to be careful, they don’t want to split liquidity. The LME’s aluminium contract is one of the most liquid in the metals world.”
(By Pratima Desai; Editing by Barbara Lewis)