LME Week 2022: the return to (a new) normal
This article was written by Martin Hayes. All views and opinions expressed are strictly his own.
It’s autumn in the UK, and that typically means three things: the trees shed their leaves, there is a flurry of underachieving Premiership football managers getting sacked, and the global metals industry descends on London for what remains the LME market’s most important global gathering.
On the face of it, LME Dinner Week 2022 marked a resumption to ‘business as usual’, as the previous two years were anything but normal. In 2020, at the height of the pandemic, there was a virtual LME Week online, while 2021 witnessed a trimmed-down limited numbers event with covid protocols in place and rigorously enforced.
So last week could be seen as the LME and the wider marketplace attempting to get back to normal; albeit with changing attitudes and focus, while there were less attendees from Asia - in particular China.
This resulted in, perhaps, an LME Week firmly rooted in the second decade of the 21st century, and somewhat distanced from the jamborees of past years.
The overall macro backdrop was not encouraging – on the macro side the price outlook is lacklustre, with the record-setting high levels of the spring, when copper was hitting an all-time peak of some $10,845 a tonne and aluminium setting best-ever prices in excess of $4,000, a distant memory now.
Despite a modest post-Dinner bounce, copper is languishing around $7,500 per tonne, while aluminium is fetching $2,200 – hopes of a post-pandemic full-blown global economic recovery have been replaced by tilts toward recession.
The war in Ukraine, high energy prices, monetary policy tightening and rising interest rates have also contributed to uncertain economic prospects for 2023/2024. And China – so important, both as a producer and consumer of metals and strategic minerals – is imposing sporadic lockdowns, as it pursues its zero-covid policy.
Then, closer to home, there is the fall-out from the March nickel market meltdown, with the LME facing multi-million-dollar lawsuits from hedge funds Elliot Associates and Jane Street Global Trading, while a trio of separate reviews into the events of the suspension, the controversial cancelled trades and re-opening are running their course.
And there is the question of Russian metal brands, with a formal discussion underway over whether the Exchange could, among other steps, suspend deliveries of this metal, with all the implications for price referencing and physical premiums this entails.
So, plenty for the industry’s movers and shakers to grapple with when the week kicked off with the LME’s keynote seminar – often an occasion when the Exchange introduces new initiatives, such as new contracts.
This time, the LME arrowed on to sustainability, with changes to LMEPassport, including emissions data comparability, non-LME grade disclosures, an artisanal mining standard, and a commitment to net-zero by 2040.
Whether these set the pulses racing is immaterial – they are a statement of the LME’s greener focus, going forward, and a wider acceptance of the extractive industry’s greater environmental responsibilities.
The centrepiece of the week – Tuesday evening’s Dinner, too, was subtly different from previous years. Both the LME Chair, Gay Huey Evans, and LME Chief Executive, Matthew Chamberlain, largely addressed the here and now of the market, with little in the way of frivolity. The LME’s backing for open-outcry trading was underscored by the LME CEO welcoming Sigma Metals to the ranks of the Ring Dealers.
Separately, and entirely away from the world of metals, guest speaker retired US Admiral Bill McRaven delivered a speech of laser-like intensity, directly focussed on global geo-politics and challenges to democracy, heard with interest in the Great Room, and with no pregnant pauses or allusions to bets on speech length.
Corridor chat, receptions and cocktails were back on the agenda, without particularly changing minds or sentiment noticeably, as the week drew to a close.
To sum up, LME Week is back, but a gathering more in tune with the wider world’s challenges on climate, politics and economics.
If 2022 signals anything it is that the LME Dinner get-together is maybe becoming less rumbustious and more serious, setting a template for the rest of the decade.