The LME has launched a market-wide consultation in an effort to ensure responsible sourcing from LME-listed brands.
In an effort to ensure responsible sourcing from producers that contribute to the London Metal Exchange (LME), a market-wide consultation was launched by the exchange on Tuesday (April 23) regarding rules and standards to be applied to LME-listed brands.
The proposed rules would see all LME brands go through a red flag assessment, to be based on guidance by the Organization for Economic Co-operation and Development (OECD), by the end of 2020.
“If this assessment demonstrates potential responsible sourcing red flags, then that brand will be classified as a Higher-Focus Brand and will also need to be audited as compliant with an OECD-aligned standard by the end of 2022,” the LME’s statement reads.
Additionally, the red flag assessment would require producers to prove whether or not they facilitate the disclosure of any possible financial crime and corruption risks. According to the exchange, this would address one major concern in large-scale mining.
“Global consumers rightly demand action on responsible sourcing — and our industry must listen,” LME CEO Matthew Chamberlain said in the statement.
“The LME is taking action because it is the right thing to do, but also because the value of our market is based on providing metal which is acceptable to those consumers, and because the metals sector looks to us to provide leadership on these important topics.”
The LME serves as a trading hub for a variety of different metals, including those in the precious, base and battery categories. In the case of cobalt, a battery metal that plays a significant role in electric vehicle (EV) development, concerns surrounding the ethical standards behind its production have been prevalent in the market for some time now.
With a majority of its global production taking place in the Democratic Republic of Congo (DRC), reports have surfaced stating that issues such as child labor have grown with the rise of the EV revolution and demand for the commodity.
In 2017, humanitarian issues surrounding cobalt production in the DRC reached a point where Apple (NASDAQ:AAPL) declared it had temporarily stopped purchasing the battery metal from the DRC in instances it was mined by hand.
Copper mining in the DRC faces similar issues as the EV wave also depends on the base metal. While the Congo is not as prevalent a producer as countries such as Chile and Peru, a 2019 report from the US Geological Survey marks it as the fifth-largest copper producer in the world at 1,200,000 metric tons.
The LME’s consultation on responsible sourcing is open until June 30, 2019.
As of Tuesday (April 18), copper was trading at US$6,443 per tonne on the LME; meanwhile, LME cobalt was trading at US$34,500 per tonne that same day.
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Securities Disclosure: I, Olivia Da Silva, hold no direct investment interest in any company mentioned in this article.