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London Metal Exchange - LME

The LME can trace its origins back to 1571 although it was formally established in 1877 as the London Metal Market and Exchange company. Today it is the world's largest non-ferrous metals exchange.

The LME trades futures and options contracts in Aluminium, aluminium alloy, North American Special Aluminium Alloy (NASAAC), copper grade A, zinc, tin, primary nickel, standard lead and Silver. It also trades traded average price contracts (TAPOs) for aluminium and copper grade A, aluminium alloy, North American Special SSL22594

Aluminium Alloy (NASAAC), standard lead, primary nickel, tin and zinc. London Metal Exchange Traded Average Price Options (TAPOs) for copper grade A, high grade primary aluminium, standard lead, primary nickel, special high grade zinc, aluminium alloy and tin are Exchange cleared contracts based on the LME Monthly Average Settlement Price (MASP).

Because many users in the industry price their physical material on the basis of the LME MASP, brokers developed off-Exchange average price option products, known as 'Asians' which quickly became popular, particularly with large producers. To meet this growing demand, the LME developed the TAPO contracts.

TAPO contracts complement existing LME futures and traded options contracts. Users of the market who trade basis the MASP will tend to use TAPO contracts. However, hedgers who trade using the LME's flexible daily prompt system will find futures or traded options more suitable hedging tools.

The exchange introduced futures and options contracts based on an index (LMEX) of its six primary metals in April 2000. In 2000 the daily value of contracts traded on the LME was about $8,000 million and the first six months of the year saw record trading of over 35 million lots equating to $1,400 billion.

The LME market is a combination of floor and inter-office trading cleared by the London Clearing House (LCH). LME membership extends to over 100 companies.

Trading in the London market starts at 7.00am with the premarket session, where members make markets in the various metals from their offices. The trading floor of the LME, called the Ring, opens at 11.40am and each contract trades in turn for a five minute period. There follows a ten minute break from 12.20 to 12.30pm, after which each contract trades again for a five minute period. It is during this second session that the settlement and official prices are determined. After these prices have been announced, usually about 1.15pm, kerb trading commences where all the contracts trade simultaneously until 3.10pm when the afternoon ring trading session follows the same procedure as the morning session. Kerb trading then lasts until 5.00pm but no official prices are issued after the afternoon session. From 5.00pm onwards trading returns to an inter-office basis and continues world wide through the night until focus returns to London in the early morning.

Floor trading in LMEX is only carried out during kerb sessions.

Although the US Dollar is the major currency for each contract, Sterling, Yen and the Euro are also accepted for clearing purposes. The Daily Official Exchange rates are announced after the morning ring session at the same time as the official prices for the metals contracts.

Futures:
Futures contracts are purchases or sales of goods for a specified delivery date in the future at prices established today. On the futures market the goods that underlie the contract are always at a specific stage of production. On the LME, this is at the semi-processed stage, where the raw material has been turned into an easily handled, non-perishable form such as ingots, cathodes, pellets etc. If the delivery of these goods take place, then the futures contract becomes a physical contract. In the main this does not happen. Futures contracts are usually cancelled out by an equal and opposite contract: buy/sell back. This is because futures trading is about price. Sometimes, it is solely about price, buying low/selling high, but usually it’s about price risk and the offsetting of risk by hedging.

The specified delivery date of a futures contract is referred to as the prompt date, by which time either the position must be closed or a delivery will take place. On the LME, the final trading day, the last day a position can be closed, is two days before the prompt date.

An important aspect of LME futures contracts is that, with the exception of the LMEX contract, they are not settled until the prompt date. They are not cash cleared. Initial margins and variation margins against risk exposure will be called during the term of a contract, but the value of a contract is not paid until delivery.

Options:
Option contracts give trade hedgers and investors a more flexible alternative to futures as a means of trading on the Exchange. When buying an options contract, the purchaser (taker) is not entering into a firm obligation. They are simply buying a choice of action. This choice allows the genuine trade hedger the opportunity of locking in a fixed price while maintaining the ability to abandon the option in order to take advantage of favourable price movements. This would be forfeited with a straight futures hedge.

The cost of purchasing the option is referred to as the premium and, unless the option is traded on, this is a write-off. It is not part of the value of the underlying futures contract. This means it is down to the user's perception of the market and the cost of the option as to whether they choose to use futures or options as their hedging medium.

Today, LME-traded option contracts are available against the underlying futures contracts for all LME metals as well as for LMEX.

LMEX:
London Metal Exchange index - is a base metals index comprising the six primary non-ferrous metals traded on the Exchange: aluminium, copper grade A, standard lead, primary nickel, tin and zinc.

The index, launched on 10 April 2000, tracks the performance of the underlying metal contracts traded on the world's premier non-ferrous base metals exchange against this initial evaluation of 1000 set on 4 January 1999.

LMEX futures and traded options contracts have been specifically designed to provide investors with easy access to the world's industrial metals market, without the physical delivery, storage and transaction costs associated with the underlying contracts.

As an exchange developed contract, LMEX offers transparency with the security of clearing, stability through regulation and a global trading structure that are the hallmarks of the London Metal Exchange.

TAPO Contracts:

London Metal Exchange Traded Average Price Options (TAPOs) for copper grade A, high grade primary aluminium, standard lead, primary nickel, special high grade zinc, aluminium alloy and tin are Exchange cleared contracts based on the LME Monthly Average Settlement Price (MASP).

Because many users in the industry price their physical material on the basis of the LME MASP, brokers developed off-Exchange average price option products, known as 'Asians' which quickly became popular, particularly with large producers. To meet this growing demand, the LME developed the TAPO contracts.

TAPO contracts complement existing LME futures and traded options contracts. Users of the market who trade basis the MASP will tend to use TAPO contracts. However, hedgers who trade using the LME's flexible daily prompt system will find futures or traded options more suitable hedging tools.

 

 

 

 

 

 

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 Current Metal News Articles  FREE

Jul 30Copper bounces as spotlight falls on tight supplies(Reuters)

Jul 30Copper Rises in Asia on U.S. Economic Growth; Zinc, Aluminum Up (Bloomberg)

Jul 30LME Copper Rises on Stockpile Drop, `Tight’ Supply; Zinc, Tin Gain (Bloomberg)

Jul 29Codelco to Resume Production at Second-Largest Mine(Bloomberg)

Jul 26Metal Prices ’Will Stay Sky-High for Years’(Telegraph)

Jul 26Electricity surge to power aluminum prices(Reuters)

Jul 26Workers strike at Zambian Chambishi cobalt producer(Reuters)

Jul 24BHP Copper, Nickel, Iron Output Rises to Records (Bloomberg)

More Other News

 Dow Jones Metal Market Analysis (GMT)

Jul 3011:55DJ BASE METALS: Comex Copper Seen 2 Cents Lower At Pit Open

Jul 3010:23DJ BASE METALS: Avoiding Further Risk Reduction; Fresh Buys Seen

Jul 3007:52DJ BASE METALS: China Copper Futures Settle Up On Strong Demand

Jul 3007:10DJ BASE METALS:LME Metals Bounce As Asia s Equity Mkts Resilient

Today's Market Talk

 Dow Jones Metal News (GMT)

Jul 2923:39DJ WSJ(7/30) More Parts Producers Give Up On Auto Industry

Jul 2921:30DJ WSJA(7/30) US Activists Take Aim At Chinese Products

Jul 2716:19DJ European Minor Metals, Ferro-Alloys Spot Market Prices

Jul 2704:00DJ WSJ(7/27) A Big Backer Of Refco Sues

Jul 2702:47DJ FOCUS: LME Nickel Fall From Grace To Continue On Steel Cuts

Jul 2701:11DJ UPDATE: Codelco Confirms Teniente Copper Production Halted

Jul 2616:01DJ LME Zinc Seen At $4,000/Ton; Rally To Be Short-Lived-Analysts

Jul 2606:28DJ UPDATE:Crackdown Halts Southern China's Scrap Copper Imports

Jul 2515:00DJ IMF Lifts Forecasts For World Output, Commodity Prices

Jul 2514:10DJ U.S. Aluminum: Midwest Premium Steady In Range of 2.5-3 Cents

Jul 2513:42DJ 2nd UPDATE:Arcelor Mittal Plans $18B Invest In India Plants

Jul 2511:42DJ LME Lead Looks Vulnerable To A Correction Lower - Analysts

Jul 2413:36DJ UPDATE:U.S. Steel 2Q Net Down 25% On Flat-Rolled Weakness

Jul 2413:02DJ UPDATE: Ryerson Agrees To $1.06B Buyout By Platinum Equity

Jul 2410:30DJ Stainless Alloy Surcharge Seen Falling In August - Outokumpu

More Dow Jones Metal News

 

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UK Stocks Rise for First Time in 5 Days; ICI, BHP Pace Gains
Bloomberg - 3 hours ago
The benchmark FTSE 100 Index added 20.1, or 0.3 percent, to 6235.3 at 8:57 am in London. The FTSE All-Share Index gained 0.5 percent to 3225.28. ...
UK Stocks Rise for First Time in 5 Days; HSBC, ICI, BHP Gain Bloomberg
all 8 news articles »

Steel index biggest loser as Sensex melts
Economic Times, India - 27 Jul 2007
As the key index dropped by 541.74 points at 15234.57, the metal index plunged by 638.19 points at 11501.52 on aggressive selling by funds at almost all ...

Asian Stocks Rise, European Shares Fall; JFE Holdings Gain
Bloomberg - 1 hour ago
The Morgan Stanley Capital International World Index, a global benchmark, rose 0.1 percent to 1556.66 as of 11:25 am in London. US futures also advanced. ...
Stocks Fall in Europe, Rebound in Asia After Global Sell-off Bloomberg
all 11 news articles »

 

Metalprices.com produces current charts for LME Aluminum, Copper, Nickel, Tin, Lead, and Zinc prices, as well as COMEX Copper and Aluminum prices. Click the link below to see metal price charts:
Metal charts

Every metal on Metalprices.com has its own dedicated main page.  Copper  Aluminum, Nickel, Tin, Lead, & Zinc price pages are linked below.

COPPER  PRICES
LME, COMEX, and Shanghai Copper Prices - click the link below for copper prices, copper price charts and copper news.
Copper Prices & News

ALUMINUM PRICES
LME, COMEX, and Shanghai Aluminum Prices - click the link below for aluminum prices, aluminum price charts and aluminum news.
Aluminum Prices & News
NICKEL PRICES
LME Nickel prices - click the link below for Nickel prices, Nickel price charts and Nickel news.
Nickel Prices & News

TIN PRICES
LME Tin prices - click the link below for Tin prices, Tin price charts and Tin news.
Tin Prices & News

LEAD PRICES

LME Lead prices - click the link below for Lead prices, Lead price charts and Lead news.
Lead Prices & News

ZINC PRICES
LME Zinc  prices - click the link below for Zinc prices, Zinc price charts and Zinc news.
Zinc Prices & News

LIVE FEEDS
Subscribers have access to  LME Copper, Aluminum, Nickel, Tin, Lead, and Zinc, and NYMEX COMEX Copper and Aluminum prices in Real Time or 30 Minute delayed live feeds:
Metal Price Feeds
CURRENCIES
 LME Copper, Aluminum, Nickel, Tin, Lead, and Zinc, and NYMEX COMEX Copper and Aluminum prices can be viewed  in 40 different currencies as well as value per pound (LB), Kilogram (KG) and Metric Ton (MT)

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