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| LME low carbon Premiums |
The London Metal Exchange (LME) is moving forward with its plan to establish sustainable premiums for base metals. This development comes as low-carbon premiums steadily gain traction across the metals industry, aligning with the global push toward sustainability in metal production. With several key metals already tracking low-carbon premiums, the LME aims to build a comprehensive framework for assessing and publishing these premiums.
The Rise of Low-Carbon Metal Premiums
Low-carbon premiums are becoming an increasingly important factor in the base metals market. These premiums reflect the reduced carbon emissions associated with the production of metals like aluminium and nickel. For example, low-carbon aluminium is defined by a maximum of 4 tonnes of CO2e per tonne of aluminium, covering both Scope 1 and Scope 2 emissions. Since 2021, low-carbon premiums for aluminium have been published in Europe, the US, East Asia, and more recently, Mexico.
The LME plans to expand these premiums to include its own approved brands, providing transparency through the LMEpassport digital credentials register. This initiative will enable the market to track and verify sustainability data, ultimately supporting the trade of metals produced with lower carbon footprints. The LME's goal is to publish premium prices for these sustainable metals, allowing the industry to unlock the potential value of more environmentally friendly production practices.
Defining Carbon Footprint Thresholds for Base Metals
The LME’s new initiative will include specific carbon footprint thresholds for several key metals. These thresholds are based on third-party sustainability assurances and will serve as the foundation for the new “green” premium assessments. The LME has outlined the following maximum carbon footprints for the metals it will assess:
- Aluminium: 10 tonnes CO2e per tonne
- Copper: 10 tonnes CO2e per tonne
- Zinc: 3.5 tonnes CO2e per tonne
- Nickel: 20 tonnes CO2e per tonne
These carbon footprint thresholds will help define what constitutes a low-carbon premium for each metal, ensuring clarity and consistency in sustainability reporting. However, the LME acknowledges that there may be challenges with some metals, like copper, where market participants are uncertain whether consumers will be willing to pay a sustainability premium in the early stages of this initiative.
Market Response and Pilot Programs
The LME’s sustainability premium initiative is already in motion, with a successful pilot program for low-carbon nickel. Since March 2024, significant quantities of low-carbon nickel have been traded on the MetalsHub platform. Between January and September 2025, additional tonnes of low-carbon nickel were traded, reflecting growing interest in sustainable metal options. The LME continues to monitor market participation and feedback to fine-tune the premium pricing mechanism.
Despite the positive momentum, the LME understands that not all base metals will see immediate uptake in their sustainability premiums. For example, the market has expressed doubt about the willingness of copper consumers to pay a premium for low-carbon copper, potentially slowing the development of this market segment.
Conclusion: The Future of Sustainable Base Metal Premiums
The LME’s plan to establish sustainable premiums for base metals represents a significant step toward aligning the metals market with global sustainability goals. While the adoption of these premiums may take time, particularly for metals like copper, the initiative is expected to drive more transparent pricing for sustainable metal production. As feedback from industry stakeholders continues to shape the development of these premiums, the LME’s framework will likely play a key role in the future of green metal trading.
ScrapInsight Commentary
The LME’s initiative to establish sustainable premiums for base metals marks a critical shift in the industry towards environmentally conscious production. While early market responses may be cautious, the increasing focus on low-carbon premiums could drive long-term value in the metals market, especially as consumers demand more sustainable options.
