Brexit: Impact on the LME

The London Metal Exchange (LME) has long been stalwart of the metals industry. As one of the largest metals trading platforms in the world, the LME often dictates global benchmark prices for a number of metals, specifically copper and other base metals.
But with the result of the recent Brexit referendum last week, could there be changes on the horizon for the LME?
According to Hong Kong Exchanges and Clearing (HKG:0388), which controls the LME, the answer to that question is no. CEO Charles Li told Reuters that most traders are based in Asia, so Brexit won’t have any serious effects on the LME.
The LME itself was not able to provide a spokesperson on the topic, but provided the following statement to INN via email:

The LME respects the outcome of the referendum on the UK’s membership of the European Union. In advance of the referendum, we carried out impact assessments on the LME and LME Clear and we are confident that our systems and processes are robust and will ensure the continuance of a fair and orderly market.
While we anticipated that there might be increased volatility both during and following the outcome of the vote, we do not envisage any major impact on our markets.
We are unable to comment on any potential changes to legislation or policy until the relevant authorities have issued their respective guidance.

Certainly, there has been plenty of market volatility in the wake of the referendum. The British Pound dropped to levels not seen since 1985, and gold prices spiked to over $1,330 per ounce as the world’s stock markets saw substantial drops.
However, brokers on the LME told the Financial Times that they did not expect Britain’s exit from the EU to have a significant impact on metals pricing. “To be honest we’re not a big player in commodities, it’s all about China,” one trader told the publication on Friday. “The market has just followed the currency lower today.” Indeed, gold prices have dipped back down slightly, although they’re still sitting at $1,318 per ounce.
Copper prices, however, hit a 7-week high on Tuesday. As Reuters reported, Benchmark copper was up 2.3 percent to finish the day at $4,818 per tonne, earlier touching $4,830.
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