LONDON, Oct 20 – Recent developments in the metals market have garnered significant attention.
Gold has reached unprecedented levels, while silver gradually follows suit. Rare earths have become the focal point of a trade dispute between the U.S. and China, and supply chains for industrial metals are being challenged by an evolving landscape of tariffs and geopolitical strife.
There was a lot of chatter during this year’s London Metal Exchange (LME) Week, filled with seminars and social gatherings.
Here are five major takeaways from last week’s annual metals conference in London.
Green Premium
The owner of the LME, Hong Kong Exchange Clearing (HKEx), surprised attendees at the start of LME Week by declaring the formation of a new subsidiary in Dubai.
Commodity Pricing and Analysis Ltd (CPAL) is leaning on LME’s responsible sourcing criteria and trading data from the digital platform Metalshub to introduce a ‘green’ premium.
Metalshub expects to trade over $220 million worth of Class I refined nickel in 2023, with significant transactions kicking off in March 2024. This ‘greenish’ nickel is characterized by carbon emissions below 20 tons per ton of metal.
The goal is to use Metalshub prices to create a sustainable nickel premium and to set a foundation for other metals, like copper and aluminum.
If trading volume falls short, CPAL plans to use “structured expert judgment” for setting the premium, with the assumption that some form of premium will always be established.
This approach adds an intriguing dimension to the discussion surrounding price reporting agencies such as Fastmarkets, Argus Media, and S&P Global Platts.
HKEx believes establishing connections in Dubai is essential for strengthening ties with the growing metals markets in China and the Middle East.
Smelters vs. Miners
“Just putting things on the ground is not safe,” remarked Richard Holtum, CEO of trading firm Trafigura, at an LME seminar, emphasizing that smelting is more crucial than mining.
If Western nations aim to diminish China’s dominance over essential metals like gallium and germanium, they will need robust base metal smelters to produce them, he stressed.
This message resonated with the Australian government, which has committed A$135 million ($87.4 million) to keep Trafigura’s two plants operational.
The scenario is compounded by a significant decline in smelting prices for copper and, to a lesser degree, zinc. China’s rapid capacity expansion is impacting profitability elsewhere.
Negative processing conditions for spot copper are complicating what would typically be a key revenue stream for smelters.
In an unprecedented move, Japan, Spain, and South Korea jointly expressed deep concerns over the current state of the copper raw materials market.
The traditional benchmark pricing system, reliant on fixed annual or quarterly terms, may need reevaluation as smelters explore custom agreements with miners and traders.
Everyone Loves Dr. Copper
In a poll during the LME Seminar, copper was voted as the metal with the greatest potential for price increases, which isn’t surprising, really.
This year, though, the optimism was particularly high in London.
Drivers for higher copper prices include a shift in funds towards hard assets, a disarray in raw materials markets, and inventory shortages as global stocks are reallocated to the U.S.
Even those who typically take a contrary position, such as Ken Hoffman from Traubenbach Associates, acknowledge that a robust demand growth outlook and supply challenges exist.
Experts project a 24% increase in global copper demand by 2035, according to Wood Mackenzie. They cautioned that sectors like data centers might “extend demand and price volatility beyond expectations.”
A notable increase in producer premiums for next year’s European deliveries is bolstering the bullish sentiment.
Chilean producer Codelco intends to charge a premium of $325 per ton for 2026 deliveries, rising from $234 this year. German manufacturer Aurubis has similarly announced a price hike to $315 per ton.
This reflects the current tariff environment. A substantial amount of copper is moving to the U.S. to capitalize on tariff advantages, which inevitably raises costs for the rest of the world to ensure supply.
Everything Changes to Aluminum
Jorge Vázquez from HARBOR Aluminum caught the audience by surprise with his upbeat outlook on light metals, donning striking maroon knitwear.
Previously bearish, he now argues that aluminum prices, which sit at $2,765 per ton, could reach $3,000—perhaps even more than $4,000 per ton in the near future.
This shift indicates a market reassessment regarding aluminum supply dynamics.
China shows little inclination to loosen smelter capacity limits, and analysts are voicing concerns about whether supply growth will keep pace with demand for the first time in decades.
Germanium
Theo Luas from Indium Corporation remarked that germanium “doesn’t exist.”
China’s exports of crucial chip-making materials have dropped sharply after the government tightened export regulations at the end of 2024.
According to Project Blue, prices have soared to a 25-year high, though some buyers struggle to acquire the material at any price, Luas noted during consultancy discussions.
Todays’ germanium might become tomorrow’s gallium—or any other critical mineral dominated by China’s processing capacity.
Rare earths have become a significant point of contention between the U.S. and China, as Beijing has recently expanded its list of export restrictions to include five more elements.
Even many traders aren’t familiar with holmium, erbium, thulium, europium, or ytterbium, yet these elements now hold profound significance for global markets.
