LME to launch separate trading platform for high ESG criteria aluminum

London — The London Metal Exchange will be launching a standalone spot trading platform next year for the exchange of aluminium warrants, enabling downstream users to procure metal with their required characteristics, such as low carbon, an LME spokeswoman told S&P Global Platts June 5.

"We will be working with the market on the launch timeline but we would estimate that the platform could be ready for go-live as soon as the end of next year, possibly sooner," she told Platts.

The spokeswoman also said the platform would be used for aluminum with a number of characteristics, including the volume of CO2 emitted in the course of its production.

"We are actively engaging with our stakeholders on environmental sustainability issues - particularly in the aluminium sector, and are committed to supporting initiatives that facilitate the global transition to a low-carbon economy," the spokeswoman said, adding the LME also plans to launch an aluminium scrap contract.

The other characteristics the new platform would be set to promote had not yet been laid down and its potential impact on existing aluminum trade on the exchange was not clear either.

"We are still working with the market to figure out the details and will have more information to share over the coming months," the spokeswoman said.

Market sources say that what they understand for now is that the aluminum traded on the new platform will have a price premium because it is expected to meet higher, responsible-sourcing requirements. The move toward a premium market, promoted by several low carbon aluminum producers, including Russia's Rusal, has its opponents on the demand side.

Several traders said producers should not pressure consumers to pay higher prices and a premium would only take hold if driven by the consumer and end-user attitudes to higher- and lower-carbon producers. At present, no one was asking for green material, they said.

They also pointed to that fact that a large proportion of aluminum from outside China is low-carbon making it difficult to begin charging more for what buyers are already receiving. Low-carbon material already forms a significant part of the market, they said, meaning it was not a premium, but a discount for higher-carbon metal that should be introduced instead.