LME calls for carbon emissions disclosure from aluminium producers by 2025

On May 1, 2024, the London Metals Exchange (LME) initiated a consultation process mandating aluminium brand producers, eligible for delivery under its contracts, to furnish carbon emissions data by March 2025. The objective is to synchronise the aluminium market with the stipulations of Europe's Carbon Border Adjustment Mechanism (CBAM), which imposes carbon-related expenses on specific imported goods.

LME-approved primary aluminium producers and aluminium alloy producers, as well as participants in the North American Special Aluminium Alloy Contract (NASAAC), will be required to furnish emissions data for both Scope 1 and Scope 2 to the trading and price-formation venue of choice for industrial metals globally (LME). This clear and straightforward requirement ensures their compliance with the industry's environmental standards.

Scope 1 emissions encompass direct emissions from the production of aluminium, including the fuels utilised in melting furnaces. On the other hand, Scope 2 entails indirect emissions stemming from generating electricity utilised in aluminium manufacturing.

According to the proposal, producers must furnish these emissions data "at the point where it attains LME-grade material."

Aluminium producers must submit their initial emissions data for 2024 by March 15, 2025, and subsequently update it each year. Brands failing to provide emissions data risk being removed from the list. Additionally, the delivery of aluminium to LME-registered warehouses will require the completion of a "CBAM" emissions reporting form. Retrospective reporting is not mandated for aluminium, which needs more information that is already stored in warehouses.

The world centre for the trading of industrial metals, London Metal Exchange, said, "The LME has liaised with its own LME-listed primary aluminium brands to understand the extent of work already being done within the space, and 84 per cent of LME Primary Aluminium brands already publish sustainability reports which include their emissions calculations."

The LME is contemplating collaborating with Metalshub to introduce an "LME globally deliverable low carbon aluminium (CBAM)" product to monitor the liquidity of aluminium with carbon footprints below a certain threshold.

Reiterating its position since 2021, the exchange firmly states that there's no need for a separate platform dedicated to trading low-carbon aluminium. The LME platform, with its established infrastructure and global reach, can effectively facilitate the trading of low-carbon aluminium, providing a valuable service to its members.

Aluminium, a lightweight metal extensively utilised in transportation, packaging, and construction, stands as one of the most energy-intensive metals to manufacture, demanding substantial electricity inputs.

According to the International Aluminium Institute's (IAI) data for 2022, the aluminium sector released 1.11 billion tonnes of carbon dioxide.