What is the London Metals Exchange?

-By Ron Styne

People wonder how the price of copper and steel are determined because those levels have such an impact on many of the products sold in both the electrical and industrial industries. The price on metals is determined by the London Metal Exchange (LME).London Metal Exchange

The London Metal Exchange (LME) is a futures exchange with the world’s largest market in options and futures contracts on base and other metals. The LME offers contracts with daily expiration dates of up to three months from trade date. There are also longer-dated contracts up to 123 months and the exchange also allows for cash trading.London Metal Exchange

It offers hedging, worldwide reference pricing, and the option of physical delivery of metals to settle contracts. The exchange is owned by Hong Kong Exchanges and Clearing.

London Metal Market and Exchange Company was founded in 1877, but the market traces its origins back to 1571 and the opening of the Royal Exchange, London.  In the beginning only copper was traded. Lead and zinc were soon added but only gained official trading status in 1920. The exchange was closed during World War II and did not re-open until 1952. The range of metals traded was extended to include aluminum (1978), nickel (1979), tin (1989), aluminum alloy (1992), steel (2008), and minor metals cobalt and molybdenum (2010).

The LME offers futures and options contracts for aluminum, aluminum alloy, NASAAC (North American Special Aluminum Alloy), cobalt, copper, lead, molybdenum, nickel, steel billet, tin and zinc.

This exchange and the trading that takes place, effects the levels of metals throughout the world, ultimately having an impact on the prices of finished goods.

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