Online industrial metals platforms are gaining momentum this year by targeting the physical trade of minerals worth about half a trillion dollars a year, gradually enticing traders to move away from largely paper-based systems.
The digital venues have attracted traders as London Metal Exchange volumes fell after the coronavirus pandemic temporarily closed its floor for open outcry trading in March 2020.
As the metals industry gathers in person for LME Week starting on Monday, the digital venues are also tapping into the global move towards sustainability by embedding traceable data about sourcing and CO2 emissions into their systems.
Investors have shown confidence in the new online platforms, with MineHub listing in Canada last month and Swiss-based Open Mineral’s $33 million fundraising including Abu Dhabi’s sovereign wealth fund Mubadala.
Germany’s Metalshub is set to more than triple turnover this year to 1 billion euros, attracting big clients such as miner Anglo American.
“The metal industry is just painfully slow in adapting to technology,” Chief Executive Frank Jackel of Metalshub told Reuters in an interview.
“But they now see it’s making life much easier. Efficiency is one key factor and there’s a huge compliance advantage.”
MineHub and TradeCloud in Singapore are seeking to digitise trade finance and logistics in metals and mining by using blockchain, a digital ledger.
MineHub provides services after deals have been agreed, similar to the fulfilment services by Amazon, Chief Executive Arnoud Busmann told Reuters.
“After the Amazon one-click, all the hard work starts – logistics, customs, payments – that’s the bit that we do.”
The platforms have succeeded in targeting physical trading as exchanges such as CME Group Inc and the LME largely cater for financial investors.
The exchanges include the option of physical delivery, but more than 99% of LME trades are financially settled.
Metalshub mainly deals in ferro-alloys used in the steel industry, which are not listed on the main exchanges. But its second most traded product is nickel, which is traded on the LME.
The platforms are attracting major companies, including the world’s biggest listed mining group BHP, which signed up in April to become a user of MineHub after using it for its first blockchain trade in iron ore a year earlier.
Big firms using Metalshub include Anglo American and Finnish stainless steel producer Outokumpu.
(By Eric Onstad; Editing by Pratima Desai and Louise Heavens)