London Metal Exchange plans low carbon aluminum platform

Commodities & Futures
© Reuters. Traders work on the floor of the London Metal Exchange, in London © Reuters. Traders work on the floor of the London Metal Exchange, in London

By Pratima Desai and Zandi Shabalala

LONDON (Reuters) – The London Metal Exchange on Thursday outlined plans to support sustainable metal production with a spot trading platform for low carbon aluminum and a register where producers can voluntarily log their metal’s carbon-related details.

The exchange will eventually look at other metals, but will start with aluminum because power is major component – sometimes up to 40% – in the smelting process.

Although energy intensive, aluminum is vital for the transition to a lower carbon economy, including in the auto sector where it is valued for being lighter than steel and infinitely recyclable.

The proposals in a paper issued to LME members also include the launch in the first half of next year of a cash-settled contract for aluminum scrap generated by the U.S. drinks industry and scrap steel contracts for Taiwan and India.

A lithium contract will also be launched at the same time.

Although there is no industry agreement on how metals can transition to a low carbon economy, the 142-year old exchange is aiming to build consensus.

“We are going to provide routes where buyers and sellers of metal with particular sustainability characteristics can come together,” LME Chief Executive Matthew Chamberlain told Reuters.

The spot platform will facilitate price discovery and trading of sustainably-sourced metal.

“This online auction style solution will deliver access…on a voluntary basis to those who would like to buy or sell low carbon aluminum,” the exchange said.

The digital register, known as LMEpassport, will be used to store carbon-related details for aluminum.

“Interested producers or metal owners could input the environmental criteria of their brands, certification by an industry scheme, recycled content, use of carbon offsets, or water or tailings management schemes,” the LME said.

The deadline for feedback on the proposals is Sept. 24. An analysis of the feedback will be published in the fourth quarter and the spot trading platform and LMEpassport are expected to launch in the first half of 2021.

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