Research — Oct. 23, 2025
Key themes from LME Week 2025
By Ronald Cecil
LME (London Metal Exchange) Week, the premier annual gathering for the metals industry, took place in London from Oct. 13–17 and drew one of the largest turnouts in recent years. The week featured numerous events that provided attendees with ample opportunities to network, present and discuss various issues impacting the metals and mining sector.
Below is a summary of the key themes from LME Week 2025.
Overarching themes
Decarbonization, sustainability and "green premiums" for metals
➤ The industry's focus on reducing carbon emissions has intensified, with various initiatives emerging to facilitate this transition. On Oct. 13, the LME announced plans to implement price premiums for low-carbon base metals, such as copper, nickel, aluminum and zinc. The initiative aims to incentivize the production of sustainably sourced materials. This indicates a shift toward valuing not just quantity of output but the environmental credentials of metals. However, there is a healthy dose of skepticism regarding whether customers will accept the higher costs associated with these premiums, notably in the copper sector.
➤ The EU's Carbon Border Adjustment Mechanism (CBAM) is becoming increasingly relevant for in-scope metals supply chains; aluminum, iron and steel. Aluminum and steel exporters to the EU without carbon emission disclosure or compliance mechanisms are facing growing regulatory pressure. Producers are also now required to report their emissions, which raises concerns about the accuracy and transparency of sustainability data throughout the supply chain.
Caution on demand outlook
➤ Presenters struck a cautious tone around the metals demand outlook, weighed by uncertainty around trade tariff impacts and China's economic health. There were divergent views on China's economy, which is being shaped by ongoing property sector issues, trade tensions, government policies and strong exports. Bearish sentiment stems from stagnant Chinese steel demand, persistent weaknesses in the property sector, and high inventories, while some remain bullish on strong copper demand from energy transition and AI, alongside potential for Chinese stimulus measures. However, a wait-and-see approach was largely in play ahead of China's government meeting in Beijing this week to decide on key goals for the economy, which will likely form the basis of the country's next five-year plan.
➤ Despite significant market buzz around demand from AI and the energy transition, at the LME seminar on Oct. 13, Trafigura Group Pte. Ltd.'s CEO Richard Holtum noted that traditional sectors — like infrastructure, power, consumer goods and construction — will drive 90% of copper demand over the next decade. At BMO Bank NA's research seminar on Oct. 14, Trafigura's chief economist also cautioned that copper prices may be overly optimistic regarding AI's impact, emphasizing that while AI represents a future growth opportunity, it has not yet materialized in a major way in current demand. The majority of copper demand growth is still driven by traditional uses, which far exceed contributions from sectors like data centers.
Metals supply chain vulnerabilities
➤ Several analysts noted that recent developments reveal the fragility of the global metals supply chain, highlighted by China's export controls on refined metals and critical minerals, which pose strategic risks. Governments in Japan, South Korea and Spain have raised concerns about unsustainable processing fees and smelting capacity, indicating supply-chain stress. Additionally, a decline in the LME's global warehousing capacity, with stocks at multiyear lows, signals tighter physical metal availability. Consequently, metal markets are increasingly influenced by jurisdictional risks, processing bottlenecks and inventory constraints, rather than solely by mine output.
Processing, smelting gaining strategic importance
➤ The insights shared by Richard Holtum at the LME metals seminar emphasize a crucial aspect of national security in relation to the metals industry. His call to bolster domestic smelting and refining capacity in Western markets reflects growing concerns about strategic dependencies on foreign nations, particularly for specialty metals that are integral to base metal processing. This aligns with the broader trend of countries aiming to secure their supply chains for critical minerals, especially in light of geopolitical uncertainties.
➤ The current juxtaposition of a copper concentrate shortage with an oversupply in smelting capacity presents an intriguing dynamic in the market. Recent discussions with Aurubis AG further illustrate how mine suppliers are strategically managing their concentrate sales to mitigate country risks, particularly by focusing on allocations to Europe and Asia ex-China. This could be seen as a proactive approach to safeguard supply chains and reduce vulnerabilities associated with relying on specific regions for critical resources.
Benchmarking and pricing system under pressure
➤ Industry leaders highlighted that the traditional benchmark pricing system for copper concentrate treatment and refining charges (TC/RCs) is under significant strain. A global shortage of concentrate supply has shifted bargaining power to miners, driving spot TC/RCs far below annual benchmark levels. This disconnect has led to questions about whether the annual benchmark still reflects market reality, with some predicting it may be set at near-zero — or abandoned entirely — in 2026.
➤ The pressures stem from tight mine supply, rising smelter costs (especially from energy and environmental compliance), and growing regional variation in market conditions. As a result, many buyers and sellers are turning to spot or index-based contracts that better reflect real-time conditions. This shift reflects a broader trend across metals: traditional, fixed pricing models are giving way to more dynamic, market-responsive systems, especially as sustainability metrics and geopolitical factors become more central to trade.
➤ Freeport-McMoRan Inc.'s move away from the traditional benchmark pricing system for copper concentrate was a hot talking point among market participants. Freeport's top commercial executive said in an interview on Oct. 14 that the company plans to protect smelters' profitability by opting for individual supply agreements next year rather than following the benchmark. This approach allows for more flexibility and potentially better alignment between the prices paid for concentrates and the actual costs and conditions faced by smelters. It also indicates a response to the challenges and opportunities present in the current market landscape, such as supply disruptions, fluctuating demand, varying production costs and the need for greater supply chain resilience.
Saudi Arabia's ambitions
➤ On Oct. 15, Saudi Arabia's "Saudi Day," spearheaded by the Ministry Of Industry And Mineral Resources, showcased the Kingdom's bold ambitions in mining and metals, directly aligned with its Vision 2030 strategy. This event underscored the country's determination to elevate its mining sector and assert its presence in the global metals arena.
➤ The Kingdom highlighted its estimated $2.5 trillion in untapped mineral wealth and outlined sweeping reforms, including a revamped legal framework, significant increases in exploration spending and the rapid expansion of licensed exploration companies. Officials emphasized that Saudi Arabia is not just a resource holder but aims to develop a full mining value chain — from exploration to processing and downstream production. The event featured key players such as Saudi Arabian Mining Company (Ma'aden), Vale SA and Alcoa Corp., and focused on attracting international investment and technology partnerships to build a modern, sustainable mining sector.
Market views: Supply-side in focus
➤ Supply constraints for base metals were a strong theme, especially for copper. The traditional benchmark system for copper concentrate TC/RCs is facing unprecedented pressure, with some industry sources predicting a negative benchmark for 2026 for the first time ever, with significant deficits in the concentrate market expected in 2025–26. The supply squeeze is due to a combination of mine disruptions, while strong growth in smelting capacity, led by China, is fueling demand. However, views on the refined copper market outlook were somewhat mixed. Many see rising inventories — especially in the US — as a sign of a 2025 surplus. Others argue it is just stock shifting from less visible regions, such as Africa. For 2026, the big debate is Democratic Republic of Congo supply growth, with traders bullish on China-backed solvent extraction and electrowinning (SX-EW) projects, while Western miners take a more cautious view. The balance between surplus and deficit hinges on how that supply plays out.
➤ In aluminum, predictions of a deficit market gained traction, although not everyone shared the more bullish view. For some, the key driver of the tightening supply is China's national smelter capacity cap of 45 million metric tons, with production fast approaching that level. High production costs have limited capacity expansion outside China. Some new capacity is coming online in India and Indonesia, but some quarters believe it may not be enough to fill the global output gap. While demand for recycled aluminum is increasing, the supply of high-grade scrap is still limited, potentially further tightening the overall market.
➤ In the zinc market, concerns were focused on potential softening due to rising supply from new projects and China's output, as well as risks from tariffs and overcapacity. Conversely, LME stocks have fallen sharply, due to traders moving metal between warehouses for speculative purposes rather than to fulfill end-user consumption. However, the sentiment suggests actual demand remains subdued, particularly in the construction sectors in China and Europe. The zinc market balance is projected to be in surplus for 2025 and 2026, driven by a rebounding mine supply and persistent weakness in demand.
➤ Views on the nickel market focused on the tension between oversupply and the growing demand for "the right nickel" — nickel produced responsibly and with low carbon emissions. Key discussions revolved around the need for sustainable production, the potential for an oversupply to last until 2030, and the impact of geopolitical factors, such as potential sanctions. Some analysts, such as those at Macquarie Group Ltd., predicted that the nickel market could remain in a state of oversupply until 2030. However, moves to tackle oversupply are providing a glimmer of hope, with Indonesia's government recently cracking down on environmental and safety issues, revoking mining permits from those who violate regulations.
➤ Discussion around the cobalt market centered on supply uncertainty, driven by the DRC's export quota system, which is tightening supply and causing price volatility. Among topics also covered was the shift in demand from certain EV markets toward lower-cobalt or no-cobalt battery chemistries, such as lithium-iron-phosphate (LFP), contrasting with the continued growth of EV adoption globally. Overall, the outlook was a mix of concern over near-term supply disruptions and questions about long-term demand driven by evolving battery technology.
➤ The outlook for the lithium market was mixed, with a consensus that while the long‑term fundamentals remain solid, the next 12‑18 months are likely to be challenging. The market faces continued oversupply due to high inventories and production expansions in China, despite new export controls on battery materials and potential for short-term supply shocks. Despite pressure from slower-than-expected EV demand, analysts noted that the surplus is expected to ease in 2025 and that we could potentially see a tighter market start to emerge in 2026. Participants pointed to delayed project timelines, rising production costs, and growing geopolitical and environmental pressures as factors that could constrain future supply. Despite short-term weakness, the long-term fundamentals for lithium remain strong, driven by continued electrification and battery demand.
➤ Key topics for the iron ore market included ongoing China-BHP Group Ltd. contract negotiations and the imminent start of Simandou's greenfield iron ore project in Guinea. BHP and China's state-owned buyer, CMRG, are in a standoff over iron ore pricing, supply terms and settlement currency, with rumours circulating of an increased portion of contracts being settled in renminbi. The dispute reflects China's broader push to gain more control over iron ore pricing as steel demand slows and global iron ore supply grows, highlighting rising tensions between major miners and Beijing's centralized buying strategy. The situation is also a prelude to the start of shipments from the Simandou mine, which is majority Chinese-controlled and set to deliver high-grade ore. Simandou will significantly increase supply and strengthen China's negotiating position in the coming years, with large surpluses expected to emerge in the seaborne traded market over the coming years.
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This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.