Analysis-LME-linked group battles to secure trading data on sustainable metals premiums

By Eric Onstad

LONDON, Oct 19 (Reuters) - A London Metal Exchange-linked pricing agency that aimed to publish premiums for sustainable metals based on actual trades has struggled to convince market participants to share sensitive trading information.

Initial premiums for sustainable metals published by Dubai-based Commodity Pricing and Analysis Ltd in recent weeks for aluminium and copper were based on conversations with market participants, not trades as billed when the initiative was announced a year ago.

The LME, the world's oldest and largest venue for industrial metals trading, has resisted pressure from some miners to set up separate futures for sustainable products, saying it would dilute liquidity.

Instead, it announced a collaboration a year ago with online trading platform Metalshub, which it said would provide trading data to an independent price-setting agency to create robust premiums for sustainable metals.

Metalshub told Reuters it had so far not provided any trading data because it needed the approval of its customers.

"The utmost importance for us is that we maintain confidentiality of the transactional data," its Managing Director Frank Jackel said.

CPAL board member and LME Chief Sustainability Officer Georgina Hallett told Reuters the agency hoped to secure approval for traded values from Metalshub clients in the future.

"The more transactions we can have through that kind of robust third-party transparent venue, the stronger the premiums," Hallett said. "Ultimately, though, it's the market's choice."

Both CPAL and the LME are owned by Hong Kong Exchanges and Clearing.

ZERO PREMIUM FOR COPPER?

An initial assessment by CPAL that sustainable copper commands no premium has caused controversy among some European producers who do sell green metals at a premium, and who say the new group has too broad a definition of low-carbon copper.

CPAL's first assessment of sustainable copper on October 1, published on the LME Insight website, said consumers would not pay a higher price over the usual premium for physical LME Grade A metal in Rotterdam of $130 to $180 per metric ton.

Premiums are on top of the LME futures price.

Some European smelters said that the CPAL definition of sustainable metal should not have used 4 tons of carbon emissions per ton of metal, since that is the global average.

Austrian smelter Montanwerke Brixlegg is offering copper with 0.63 tons of carbon per ton of metal for a premium of €398 ($446) a ton for 2027.

"Using 4 tons as a definition while framing the resulting price as representative of sustainable metal is actually detrimental to the original idea," an official of Brixlegg told Reuters.

"The definition is too broad to accurately reflect the true sustainable niche."

Hallett said that since there was limited output among producers of low-carbon copper, CPAL decided to start with a higher level of CO2 to allow more smelters to take part.

CPAL's definition of sustainable metals includes a wide range of criteria, including environmental and labour issues, not just carbon emissions, she said.

CPAL WORKING ON ZINC, NICKEL PREMIUMS

Hallett said that in order to stimulate more trading data, CPAL has encouraged producers to direct small amounts of their sustainable metal to Metalshub and agree to disclose traded prices.

Despite initial hurdles, CPAL aims to roll out a wide range of metals prices that may include critical minerals, she added.

She said CPAL was working on introducing premium prices for sustainable zinc and nickel, but declined to give a firm timeline, saying it was likely next year.

Several groups already produce premiums for low-carbon metals, including Fastmarkets, whose assessments based on market intelligence cover copper, aluminium, nickel and steel.

The LME Insight website, which provides market commentary as well as premium prices calculated by CPAL, is currently free, but will likely adopt a paywall in the future so it can become self-sustaining, Hallett added.

($1 = 0.8919 euros)

(Reporting by Eric Onstad; Additional reporting by Tom Daly; Editing by Pratima Desai and Jan Harvey)