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London Metal Exchange drops the hammer on metal producers – Who's next?

London Metal Exchange drops the hammer on metal producers

The London Metal Exchange (LME) has recently revealed its plans to either suspend or delist products from specific metal producers currently listed on the exchange. This strategic move is closely tied to the commitment of the LME management to enforce a comprehensive policy on responsible sourcing within the industry.

The potential repercussions of withdrawing products from the exchange in the months ahead loom over approximately 10% of the total group of producers and refineries. This primarily concerns entities that have neglected to submit reports regarding the responsible sourcing of raw materials, a condition imposed by the LME's policy.

The policy, formulated in 2019 and grounded in recommendations from the Organization for Economic Cooperation and Development (OECD), has a targeted objective: the elimination from the market of metals, often precious ones, derived from sources deemed unethical.

This encompasses resources extracted through the use of slave labor, particularly involving children, those financing criminal or terrorist organizations, and materials originating from countries under sanctions, governed by authoritarian or totalitarian regimes, or situated in war zones.

The LME management had set a deadline for the submission of these reports by the close of 2023. The number of suspended entities may rise further as the exchange now undertakes the analysis of reports from 90% of producers who have complied with this requirement.

Conversely, the LME has expressed optimism about the potential reinstatement of a significant percentage of suspended brands once their respective producers submit delayed reports.

In light of these developments, industry analysts are likely contemplating the potential impact of suspending 10% of producers on commodity prices and the overall reputation of these entities within the sector. Clearly, this situation underscores the escalating significance of an ethical approach to conducting business, particularly within the context of the metal industry.

It is evident that the LME has been steadfast in its emphasis on transparency and social responsibility over the past few years. Furthermore, it remains intriguing to consider the decision by every tenth producer to refrain from submitting such reports was motivated by business considerations, resulted from an oversight, or was a deliberate willingness to comply with what these entities perceived as overly authoritarian demands from the London Metal Exchange.


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