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The London Metal Exchange (LME) has started to explore the potential for producing sustainable metal premia for LME-approved brands. It is currently engaging closely with physical market stakeholders on its proposals for four key LME metals. By making a sustainability price differential public, the value attached to sustainable metals will be transparent and could support the development of the market for sustainable metals.
Matthew Chamberlain, LME CEO, said: “Our conversations with stakeholders have shown that there is support for establishing a way to reflect an LME brand’s sustainability in its price. There is a growing sophistication in industry sustainability standards and accreditation programmes that cover broad criteria for different metals markets. Taken together with the disclosure and comparability of these credentials through LMEpassport and our work with Metalshub, these developments provide the opportunity to establish credible sustainability pricing premia for LMElisted metals.
“We are setting out proposals that we believe will support the formation of sustainable premia that will be accessible to the whole market. They will unlock the value attached to sustainability and have the potential to drive the development of the market for more sustainable metals.
Furthermore, the greater resilience exhibited by sustainable supply chains provides an important linkage to the global critical minerals agenda.”
The proposal
The LME’s market engagement on this proposal follows on from the LME’s partnership with Metalshub, a digital platform, on an initiative launched in 2024 to develop a price discovery mechanism for low-carbon nickel. The Metalshub platform enables consumers to buy LME-grade low-carbon nickel (using an LME prescribed carbon threshold assessed using the Nickel Institute methodology), and since March last year, Metalshub has reported the monthly volumes transacted through the platform.
The LME is now proposing to launch a broader series of sustainable metal premia for LMEbranded aluminium, copper, nickel and zinc, incorporating a more comprehensive set of criteria* than carbon footprint alone and underpinned by robust assessment processes. Metal brands that meet such criteria would need to submit all their sustainability credentials via LMEpassport. Such metal could then contribute to the price discovery of the sustainability premia via Metalshub’s spot offering.
To enable the Metalshub transaction data to be published as a price premium, the LME is proposing to establish a pricing administrator whose role would be to use trading data and apply expert judgement to publish prices. The administrator would set the rules, policies and process for the sustainability premia and market participants would be able to engage with the administrator to raise issues or provide additional data.
Dr. Frank Jackel, Co-Founder and Managing Director of Metalshub, added: "Metalshub is proud to support the LME’s efforts to bring transparency and price discovery to sustainable metals. By integrating sustainability data into trading processes, we enable participants to make informed decisions, ensuring that responsible metals receive fair market valuation. Providing the technological foundation for price discovery will help to drive the industry towards a greener and more responsible future."
Nick Stansbury, Head of Climate Solutions, Asset Management, L&G said: "We welcome the LME's proposal as a much-needed move to enable the proper pricing of low-carbon, sustainable products. We believe transparent pricing of sustainable materials is critical to incentivising investment into transition technologies in the mining industry and we look forward to the outcome of this market engagement process."
Next steps
The LME is discussing its proposals with a range of physical market stakeholders, and will provide further progress updates in due course.
