LME partners with Metalshub to develop digital metals spot market aiming ‘Green’ Aluminum

On Monday, October 11, the London Metal Exchange (LME), announced that they are planning to establish a digital base metal spot market which will focus on the trading of ‘green’ aluminum.

For this initiative, LME will be partnering with a German digital metals trading platform called Metalshub. The spot trading will be taking place on Metalshub’s existing online trading platform.

The new spot market will be aiming at physical users of industrial metals and is 144 years old exchange known for functioning Europe’s only remaining open outcry trading ring, which intends to boost their digital and sustainability credentials.

While Metalshub is considered as the global hub for metals trading, LME’s unique derivatives contracts allows traders to buy and sell futures for particular days are mostly used by the industry to evade risk as well as by financial people to wager on changes in the price of metals.

The London Metal Exchange which is rarely considered as a medium to source metal, believes that the digital platform will ensure more liquid, efficient and transparent market for physical-metals in a way that the current platform does not provide.

"Our vision of the future is that the LME is still going to be the arena where people are doing their long term hedging. But they are increasingly going to want electronic solutions for that spot trading too," says Matthew Chamberlain, the Chief Executive of the LME.

"We are committed to the physical market, we want to be better at innovation and we want to be better at digital," added Mr. Chamberlian.

According to LME, low carbon ‘green’ aluminum is the first new products available as a part of the project. Aluminum production is a highly energy-intensive industry which functions by using coal and produces significant carbon emission. Renewable energy is used for producing low carbon aluminum like hydroelectric energy.

This will allow the traders to buy and sell aluminum based on carbon footprint which will in turn help in producing price data. This price data will also provide an insight into how much the premium companies are going to pay for metals produced sustainably.

‘The LME has opted for a physical platform for green aluminum so as not to split liquidity on its established futures contracts,’ added Mr. Chamberlain said.

This initiative comes after LME reopened its physical trading in September, after it was closed during the pandemic. The shutdown leads to the review of the ring’s value in an increasingly digital landscape. Finally, LME revived themselves from closing permanently after outcry from metals traders.