Transparent pricing

The London Metal Exchange (LME) publishes a set of daily reference prices that are based on the most liquid trading sessions of the day. They are used the world over by industrial and financial participants for purposes of referencing, hedging, physical settlement, contract negotiations and margining and are indicators of where the market is at any point in time.

The most reliable prices in any market are derived from those where the greatest concentration of trading takes place. Therefore those dealing with metal labels can get fair and reasonable metal price, which largely lowers the risk in the process of making deals.

The LME provides a transparent forum for the trading of futures contracts for non-ferrous metals, minor metals and steel billet, which are perfect materials for metal labels. As a result of this trading, daily prices are 'discovered' and published by the Exchange which the physical industry around the world use as the basis of price negotiations for the physical sale or purchase of metal.

Risk management

Through its trading members, the LME offers those at all stages of the industrial raw materials supply chain, including both buyers and sellers, the opportunity to 'hedge' their price risk, and therefore gain protection from future adverse price movements. Hedging in this way is most efficient when the physical and futures transactions are made basis the current LME price. With the protection of risk management, manufacturers with a comprehensive range of metal labels can safely trade with others.

Delivery points of last resort

As a 'market of last resort', the physical non-ferrous metals and steel industries can use the Exchange's delivery option to sell excess stock in times of oversupply and as a source of material in times of extreme shortage. The market does not replace the normal channels for the buying and selling of material and only a very small proportion of contracts actually result in delivery. The presence, or 'threat', of physical delivery plays a vital role in creating price convergence between the futures and the physical market.