ROI — Rejuvenated London Metal Exchange looks to new horizons: Andy Home

(The opinions expressed here are those of the author, a columnist for Reuters) By Andy Home LONDON, Oct 16 (Reuters) — It's that time of year when the global metals industry gathers in London for the annual blitz of trading and partying that is known as London Metal Exchange (LME) Week. This year, visitors will find the exchange in remarkably good health. The 2022 nickel crisis is now receding in the rear-view mirror and, as with a string of previous LME crises, the 149-year-old institution has roared back stronger than ever.

The LME notched up record volumes in 2025, and this year is shaping up to be even better, with average daily turnover up 16% year-on-year from January to September. The trading boom is in part down to the exchange's market reform program, launched in response to the failings exposed by the nickel crisis. But war, tariffs and heightened investor interest in the metals sector have also played a part in the resurgence. Now fully recovered from its near-death experience in 2022, the LME is setting its sights on new horizons.

Bridging The Divide The LME will later this month start trading a new hot-rolled-coil (HRC) Steel Shanghai contract, which will be settled against the Shanghai Futures Exchange's (ShFE) HRC contract, widely regarded as the global benchmark for the flat steel sector. It's a significant event in the world of metals trading. The cross-listing is the first time ShFE has made any of its metal prices available to another exchange. That it has chosen the LME attests to the thaw in relations between the two exchanges since ShFE led the fight to block the LME's attempt to open warehouses on the Chinese mainland.

The nickel crisis, however, forced the two rivals to work together with the common goal of resuming trading and restoring order to what had become a highly disorderly market. Equally symbolic of the new relationship was the opening of LME warehouses in Hong Kong last year. It's belated vindication for Hong Kong Exchanges and Clearing (HKEX), which bought the LME in 2012 with the stated ambition of bridging the east-west divide. It's taken 14 years, but then-CEO Charles Li's vision is finally starting to take concrete form.

If the new steel contract is successful, it could be a template for other products. At the very least, it may reboot the LME's ferrous portfolio. The exchange has seven steel contracts, but only three have traded this year and, bucking the broader trend, combined volumes were down 29% year-on-year in the first nine months of 2026. Dubai Connector This time last year, the LME sprang something of a surprise when it announced that HKEX would create a Dubai-based subsidiary, Commodity Pricing and Analysis Ltd (CPAL), to act as a "pricing administrator" for sustainable metal premiums.

Metal premiums, sustainable or otherwise, have until now been the preserve of price reporting agencies such as Fastmarkets and S&P Global Platts, whose assessments underpin the CME's physical aluminium premium contracts. One year on, CPAL is now publishing its own price assessments for both aluminium and copper premiums in Europe under the "LME Insight" brand. The so-called "green" premium for sustainable metal brands remains elusive, but the strategy may be about to bear fruit in another part of the aluminium supply chain. Alumina, the intermediate product between bauxite and aluminium, was, until 15 or so years ago, priced as a percentage of the metal price.

US producer Alcoa led the charge to break the linkage in favour of prices determined by spot sales. The hope was that these would become indices underpinning futures contracts. That never happened. The LME's alumina contract doesn't trade and the CME contract has seen only sporadic activity.

India's Hindalco is now leading a new alumina pricing revolution with a commitment to channel its spot sales through Metalshub, a digital platform for trading and pricing raw materials. Metalshub has been working with the LME on sustainable-premium price discovery and is also collaborating with CPAL. It's not difficult to join the potential dots. A new alumina price index may arrive much faster than a transaction-based "green" premium.

If it does, the LME will be first in line to "futurise" it. The LME is on new ground here. No other exchange has built its own bridge between physical and futures metal pricing. But, as with the transformative tie-up with Shanghai, it's a sign that the venerable old institution has bounced back from its latest crisis with a new-found sense of purpose.

(The opinions expressed here are those of Andy Home, a columnist for Reuters.) Enjoying this column? Check out Reuters Open Interest (ROI), your essential new source for global financial commentary. Follow ROI on LinkedIn, and X. And listen to the Morning Bid daily podcast on Apple, Spotify, or the Reuters app.

Subscribe to hear Reuters journalists discuss the biggest news in markets and finance seven days a week. London Metal Exchange is on course for another record year (Writing by Andy Home; Editing by Marguerita Choy) ((andy.home@thomsonreuters.com, 44-207-542-4412 and on Twitter )