Metals Frequently Asked Questions
What metals are traded on the LME?
The LME trades futures and traded option contracts in the main non-ferrous industrial metals, namely primary high grade aluminium, aluminium alloy, copper grade A, standard lead, primary nickel, tin and high grade It also has an index contract - LMEX, which tracks the six primary base metals traded.
The LME is not the natural outlet for physical metal. It is, rather, a financial market used mainly for limiting future price risk, supported by a delivery of last resort. Companies with physical metal to sell will normally deal directly with their customers or through merchants. Some LME members do have a physical department.
Metal to meet deliveries of LME contracts, that do go to delivery, is stored on warrant in LME-approved warehouses and must meet the specifications of the individual metal contracts as laid down by the LME. In order to ensure the quality of metal held on warrant for delivery against LME contracts, all such metal must be of a brand listed as good delivery by the directors of the LME. If a party wishes to sell metal and that metal is of a brand and specification in accordance with LME rules, then the party can deliver the metal to the warehouse, have it placed on warrant and sell it through a broker on the LME.
How has the Euro affected the LME?
LME trading is relatively unaffected by the Euro, in that all LME contracts are traded and quoted in US dollars. However, LME contracts can be cleared in currencies other than US dollars - namely the Euro, Japanese yen and pounds Sterling. The tonnages cleared in currencies other than US dollars are relatively small so the introduction of the Euro as a clearing currency has not been particularly significant. It has broadened the range of European customers able to use this facility.
I wish to buy metal from the LME
The LME is not the natural source for physical metal. It is rather, a financial market, used mainly for limiting future price risk, supported by a delivery of last resort. Consumers wishing to buy physical metal normally do so directly from producers or through merchants. Some LME members do have a physical department. Metal to meet deliveries of LME contracts, that do go to delivery, is stored on warrant in LME-approved warehouses and must meet the specifications of the individual metal contracts as laid down by the LME. In order to ensure the quality of metal held on warrant for delivery against LME contracts, all such metal must be of a brand listed as good delivery by the directors of the LME. If a party wishes to buy metal via the LME it can do so through a broker on the LME. It should be noted that delivery is at seller's option and the location, production source and shape cannot be guaranteed. However, the metal will be of a brand and specification in accordance with LME rules and will be stored in an LME approved warehouse. The LME price is 'in warehouse' and the costs of taking up that metal will have to be met by the buyer.
I wish to trade on the LME. How do I go about this?
Trading on the LME must be done through an LME broker member (categories 1, 2 and 4) or an agent or subsidiary company acting on behalf of a broker member. Contractual arrangements between brokers and their customers are on a principal to principal basis and are negotiable.