LME WEEK: London Metal Exchange unveils plan for sustainable metal premium pricing

The London Metal Exchange is to develop sustainable metal premium pricing for LME-approved aluminum, copper, nickel and zinc brands, the exchange said in a statement Oct. 13.

The plan will also include the launch of a new HKEX Group subsidiary, Commodity Pricing and Analysis Limited, based in Dubai, which will serve as an independent price administrator for the sustainability premiums.

"Our goal is to publish premium prices for sustainable metals, underpinned by robust definitions and real trading activity -- which will enable our industry to unlock the potential value of sustainable metal production," LME Chief Executive Matthew Chamberlain said in the statement. "We recognise that there may not be a premium for every metal, but there is a clear market desire to determine whether one exists and the LME is keen to play a part in answering this question."

Pricing will be derived from executed transactions on the Metalshub digital platform, with structured fallbacks to bids, offers, and other verifiable market indications, it added.

The LME announced its plans to explore the potential for producing sustainable metal premium pricing in April. The roadmap published Oct. 13 sets out more detail on the LME's approach to sustainable metal premium price discovery -- "built on the foundational pillars of standardisation and transparency" – as well as the important role of the pricing administrator and the link between sustainable metal and critical minerals supply security.

The LME has set out its premium sustainability thresholds for each metal, incorporating both maximum carbon footprints and third-party sustainability assurances, based on internationally recognized methodologies.

The LME emphasized the importance of data integrity, adding that all pricing data will undergo thorough review and normalization for commercial factors, such as delivery location and contractual terms.

The discussion paper will remain open for feedback until Nov. 28, allowing industry participants to contribute to the final methodology that will be implemented and maintained by the new pricing administrator, CPAL.