Asia Copper Week: LME may create green aluminium mark for inventories

En+ MKPAO

20/11/2019 12:15

By Shivani Singh
    SHANGHAI, Nov 20 (Reuters) - The London Metal Exchange is
considering creating a new market for "green" aluminium, using
warehouse ownership documents to identify low-carbon material
instead of spinning off a new futures contract, its chief
executive said on Wednesday.
    The 142-year-old LME said last month it was in discussions
with the metals industry over how to support the transition to a
low-carbon economy, especially in aluminium.  urn:newsml:reuters.com:*:nL5N27A44L
    "By Q1 of next year we want to define a clear route forward
on green aluminium," CEO Matt Chamberlain told Reuters on the
sidelines of the Asia Copper Conference.    
    Primary aluminium is often a focus in the low carbon debate
as electricity accounts for between 30%-40% of production costs.
    More than half of global supply, estimated at around 67
million tonnes this year, is produced in China, where
electricity is mostly generated by coal-fired plants.
    The LME, the world's oldest and largest market for
industrial metals, has rejected the idea of creating a new
low-carbon primary aluminium contract because that would dilute
trading volumes, Chamberlain said.
    "Let's be clear, we will not split liquidity on the main
contract," he said.
    Instead, the LME, along with the industry, is exploring the
creation of different classes of LME warrants - ownership
documents for metal stored in warehouses that are deliverable
for LME contracts.
    "You could well imagine a platform where warrants are
endorsed with ... the tonnes of CO2 per tonne of aluminium, and
you go into the system and procure the aluminium with the
characteristics that you want," Chamberlain said. 
    One thorny and complex area is how to define low-carbon
aluminium, but the LME will allow the industry to take the lead
in that aspect, he added.
    One industry figure the LME has held discussions with is EN+
Chairman Greg Barker, who wants the LME to identify how much
carbon is embedded in metal traded on the exchange.
    "The sensible thing to do would be to have that carbon
disclosure and from that you can begin building a new asset
class,"  Barker told Reuters in an interview in London on
Tuesday.
    London-listed EN+  ENPLq.L  is the biggest shareholder of 
aluminium giant Rusal  0486.HK  with a 50.1% stake.
    Rusal, which produces 90% of its output using hydropower, 
launched a low-carbon brand two years ago, hoping some customers
would pay a premium.
    Chamberlain said another way to push forward the low-carbon
initiative would be to create a new contract for scrap aluminium
since processing recycled aluminium uses a fraction of the
electricity of creating new metal.
    That potential new scrap contract is one of several that may
be launched next year by the LME, owned by Hong Kong Exchanges
and Clearing Ltd.  0388.HK , he said.  urn:newsml:reuters.com:*:nL3N280212   

 (Reporting by Shivani Singh, additional reporting by Pratima
Desai and Veronica Brown in London; writing by Eric Onstad in
London, Editing by Kirsten Donovan)
 ((ShivaniSingh2@thomsonreuters.com ; +861056692115; Reuters
Messaging: shivanisingh2.thomsonreuters.com@reuters.net))