Editor’s Note
This article highlights a significant development at the London Metal Exchange (LME), a cornerstone of the global metals market since 1877. As the world’s premier venue for trading industrial metals, the LME’s benchmark prices are vital for producers, consumers, and traders worldwide. The reported milestone underscores its ongoing role in price discovery and risk management for the industry.
Founded in 1877, the London Metal Exchange (LME) is one of the world’s oldest and leading exchanges for trading industrial metals. It primarily handles operations involving base metals such as copper, nickel, zinc, or lead. A crucial aspect is the determination of reference prices for the traded metals. These prices serve as benchmarks and are used worldwide by producers, consumers, and traders to secure their contracts and hedge against potential risks. Nicole Hanson, Head of Sustainability at the LME, leads the exchange’s program for responsible metal sourcing. This sustainability expert manages and oversees the due diligence processes ensuring that producers comply with international standards, particularly regarding the environment, working conditions, human rights, and ethical business practices.
In 2019, the LME launched its own responsible sourcing program. For Ms. Hanson, this marked a turning point in the history of the nearly 150-year-old exchange. Previously, only the quality and purity of the traded metals were considered. Today, value creation and the associated production conditions are taken into account throughout the supply chain.
The London Metal Exchange imposes clear requirements on producers who wish to list their metals. These requirements can cover, for example, compliance with the OECD’s “Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas.” However, the LME does not issue certificates.
Furthermore, metal extraction sites are required to establish management systems in the areas of environmental protection, as well as occupational safety and health, and have them certified. This obligation has significant repercussions on the entire supply chain in the metallurgical industry. Now, producers must not only meet technical specifications but also explain how they manage their value creation processes responsibly and sustainably.
It is true that responsible metal sourcing had been a concern long before the LME got involved. But ultimately, it was abuses such as child labor in some mines that motivated the decision to take action.
This policy was implemented step by step. Quickly, this task proved Herculean, as it was necessary to account for highly varied global conditions regarding control and certification for producers. The LME acted as a mediator between the competing interests:
The primary path taken by the majority of partners is the implementation of the OECD standard.
With 364 listed brands across 54 countries and its long experience, the London Metal Exchange enjoys particular recognition in the sector.