From AFR:
London exchange rejects bid to have ‘green’ nickel recognisedWashington | The London Metal Exchange has rejected a bid by the Australian government, with US support, to have the clearing house recognise “clean” nickel, in efforts to help ailing Australian miners smashed by a supply glut from Chinese companies in Indonesia.
Last month it was revealed that US Ambassador Kevin Rudd held talks with the White House, mining companies and US automakers about pushing global pricing agencies such as the LME into distinguishing between nickel produced under high environmental and labour standards in Australia and “dirty nickel” that has flooded the market.
But in an update sent to its members the LME, which is owned by Hong Kong Exchanges and Clearing Limited, said there should be no such separate contract as it could hurt liquidity.
“The LME believes the market for ‘green’ nickel is not yet large enough to support vibrant trading in a dedicated green futures contract,” the exchange said.“A majority of market participants taking the view that dedicated contracts would detrimentally fragment liquidity and potentially undermine the utility of LME Nickel.”
“Market participants have expressed concern that there remains significant market debate as to how to define “green”, and further, that an LME contract representing a narrower sub-segment of the market would not attract sufficient stocks and trading volumes to be viable.”
Australia had pushed for a distinction between higher ESG-graded nickel because it could have helped lift the price of Australian nickel, make mining projects more commercially viable and build “sovereign capacity”, after BHP and other miners warned of ceasing operations with the loss of thousands of jobs.
The LME disagreed saying, “global industry consensus currently does not exist on what constitutes “green” nickel.”
“Such a standard would need to consider carbon footprint but also other sustainability criteria including environmental management practices, respect of labour rights, watermanagement, and wider business integrity and transparency considerations – to name just a few.“
The LME believes that further industry consensus and agreed industry standards will be needed in order to provide the data necessary for consumers to be able to make fully informed purchasing decisions and to support the emergence of truly green price premia.
”Industry compliance was still “relatively nascent” and that identifying a consensus regarding scope and metrics was “difficult.”The US has sought to reduce its reliance on Chinese critical minerals for semiconductors, batteries, solar panels and other products, and instead drawn closer to allies such as Australia, amid geopolitical tensions and concerns over China’s stranglehold on supplies.
Australian Resources Minister Madeleine King is this week due to meet US officials in Washington, where she will discuss the nickel glut, and the government’s $4 billion federal loan facility for nickel miners.
The LME said pricing for metal variants that differ from LME brand specifications – whether by ESG characteristic, grade, shape or location – was better conducted through digital spot trading platforms.The exchange said there was a “solution already in operation”, which enables industry participants to procure and price nickel with specific ESG characteristics.
“The LME collaborates closely with Metalshub, which has successfully operated a pricing and procurement solution for physical market participants since 2016. As of 1 March, this premium to the LME Nickel cash price is $US245 per metric tonne.Any class 1 nickel on the Metalshub platform can be listed with specific ESG credentials, including its carbon footprint.
“This allows buyers to filter against carbon thresholds of their choosing, ensuring theysource material that complies with their ESG objectives,” the exchange said.
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