The London Metal Exchange (LME) has announced that it will not introduce a separate “green” nickel contract due to market size constraints, but its partner, Metalshub, is spearheading the development of an index price to reflect the demand for low carbon nickel. The move comes in response to calls for a nickel pricing structure that aligns with robust environmental and governance standards, particularly from high-cost producers like Australia.
Acknowledging the evolving market dynamics and the need for environmentally conscious pricing mechanisms, the LME stated that defining ‘green’ remains a subject of significant debate within the industry. The exchange emphasized that launching a contract targeting a narrower market segment may not attract sufficient participation to be viable.
While the market appetite for contracts focusing on class 2 nickel materials is limited, such as nickel sulphate and matte, the LME’s existing nickel contract pertains to class 1 refined nickel with a purity level of 99.8% and above. Australian mining magnate Andrew Forrest recently advocated for categorizing nickel contracts into “clean” and “dirty” categories to provide customers with greater flexibility.
Metalshub, in collaboration with key industry players like Outokumpu and Aperam, has taken proactive steps to establish an index price reflecting consumer preferences for green nickel. The platform enables the listing of class 1 nickel with specific ESG credentials, including carbon footprint data, empowering buyers to make informed decisions based on carbon intensity metrics.
As Metalshub prepares to report monthly data encompassing trades of low carbon nickel, the LME anticipates the future publication of a low carbon index price that may evolve into a comprehensive “green” nickel premium index incorporating additional sustainability criteria. This strategic initiative aims to incorporate CO2 footprint and ESG performance metrics, potentially enabling producers to market their products with a premium based on market demand and sustainability considerations.