LME London Metal Exchange Global Benchmark Analysis

The London Metal Exchange (LME) is the world's leading trading venue for non-ferrous metals. The price and inventory data it generates have an important influence on the production and sales of non-ferrous metals worldwide. In the mid-19th century, the UK was one of the world's largest producers of tin and copper. As time went by and industrial demand grew, the UK began to import large quantities of industrial raw materials from overseas mines. Since the early 20th century, the London Metal Exchange has publicly announced its transaction prices and is widely used as a benchmark price for global metal trade. About 70% of the world's copper production is traded according to the official listed price published by the London Metal Exchange as a benchmark. This system also affects includingDBG ForexTrading including numerous global financial marekt participants.

International membership system

The LME uses an international membership system, with more than 95% of its trading volume coming from overseas markets. Trading varieties include copper, aluminium, lead, zinc, nickel and aluminium alloys. The main trading method on the exchange is open outcry trading, a process known as "circle trading", supplemented by a 24-hour telephone order market and the LME select screen trading system. The LME publishes a set of official prices every weekday, which are widely regarded in the industry as an important basis for pricing spot metal contracts.

Metals Trading Hours Program

During each working day, non-ferrous metals trading on the London Metal Exchange follows a fixed time flow. Based on Greenwich Mean Time (the difference between Greenwich Mean Time and Beijing time is 8 hours, that is, Beijing time needs to be added 8 hours), at 7:00 am, market makers start making markets. In the morning, on-site trading starts at 11:40. In the first trading market, the eight metals are traded for 5 minutes in turn. At 12:20, all 8 metals are closed in sequence. At 12:30, the second trading market opens, and each symbol continues to trade in sequence for 5 minutes. At 13:10, the second trading market ends, followed by the announcement of official quotations and settlement of the eight metals. Since the second floor trading in the morning determines the official settlement price of the day, its significance is very special. At 13:15, the official quotation session ends and over the counter (kerb) begins, during which all eight metals are traded at the same time as the LMEX trade. The LMEX floor trading actually takes place during the OTC trading time period, and it does not have a separate 5-minute trading period. During this period, 8 metals are traded simultaneously. In the morning, the OTC trading ends after the OTC price closes, and the trading is carried out indoors. At 13:30, over the counter (kerb) ends, and the whole morning trading is closed and transferred to electronic trading time. In practice, electronic trading and floor trading are carried out simultaneously, but the focus is different. The third session of the day on the London Metal Exchange (afternoon floor trading) starts at 15:10 pm. At 15:10, the third session starts; at 15:50, the market is closed for 10 minutes; at 15:55, the fourth session starts; at 16:35, the fourth session ends and over the counter (kerb) starts; at 17:00, over the counter (kerb) ends and goes to electronic trading hours. No official quotes are issued during the afternoon session.

The second session of the day on the London Metal Exchange starts at 15:10pm. The afternoon session is similar to the morning session, ending at 16:35 and then going over the counter until 17:00 for 25 minutes. The main difference between morning and afternoon sessions is that there is no important part of the afternoon session where the official settlement price is announced.

London Metal Exchange Trading Schedule

First session in the morning, time, second session in the afternoon, time

Silver 11.40 Aluminum alloy 15.10

Aluminum alloy 11.45 silver 15.15

Tin 11.50 Lead 15.20

Aluminum 11.55 Zinc 15.25

Copper 12.00 Copper 15.30

Lead 12.05 Aluminum 15.35

Zinc 12.10 Tin 15.40

Nickel 12.15 Nickel 15.45

Rest, rest

Section II, Section IV

Copper 12.30 Silver 15.55

Aluminum alloy 12.35 lead 16.00

Tin 12.40 Zinc 16.05

Lead 12.45 Copper 16.10

Zinc 12.50 Aluminum 16.15

Aluminum 12.55 Tin 16.20

Nickel 13.00 Nickel 16.25

Silver 13.05 Aluminum alloy 16.30

（1*） （2*）

Description:

(1 *): lasts over the counter until 13.30.

(2 *): lasts from 16.35 to 17.00 over the counter. Where aluminum alloy and silver end at 16.45, tin end at 16.50, zinc and nickel end at 16.55, and copper and aluminum end at 17.00.

London Copper

The LME is the world's largest copper futures market. It was established in 1876 and trades copper, aluminium, lead, zinc, nickel and aluminium alloys. Copper futures trading began in 1877. There are two main types of copper traded:

Cathode copper: Grade A copper

Copper rods: Specifications are grade A copper weighing between 110 and 125 kilograms.

Cathode copper is the most actively traded. All copper for delivery must have an A-grade copper number approved by the London Exchange and meet the British BS6017-1981 standard classification specification.

The contract rules for grade A electrolytic copper are:

Contract quantity unit 25 tons

Price quoted, USD/ton

Price fluctuation minimum range 0.5 USD/ton

Delivery date, any trading day within three months.

From three months to fifteen months is the third Wednesday of each month

Trading hours 2:00-12:05

12:30-12:35 (official price)

15：30－15：35

16：15－16：20

The LME currently has 14 member companies. Member brokerages can conduct both self-operated business and agent trading for clients. Unlike other exchanges, the LME's three-month futures contract is a continuous contract, which means daily delivery. The LME sets a floor for spot copper, or spot (CASH) copper, discounts of not less than $30 for March copper, while spot premiums are not capped. In addition, the LME has no limit on price rises and falls.

London Aluminum

Aluminum is the second most commonly used metal after steel. Thanks to its lightness, good elongation and corrosion resistance, aluminum is widely used in construction, packaging, electronics and other industries. In 2000, global aluminum production reached 21,191,000 tons, and the London Metal Exchange (LME) aluminum futures and options volume reached 25 million lots (about 600 million tons); from January to July 2001, the London Metal Exchange aluminum futures and options volume reached 15,170,158 lots (about 370 million tons). The London Metal Exchange aluminum contract is about 99.7% pure aluminum, 25 tons per lot (+/-2%), and the minimum price fluctuation of aluminum contracts is 50 cents/ton.

There are three main types of ingot shapes:

Aluminum ingots (12-26 kg).

2. T-shaped ingot (750 kg).

3. Large ingots (750 kg).

Standard delivery, physical delivery

The trading month, the most recent month plus two consecutive months, and the next 12 months.

Trading hours 11:55-12:00,

12:50-12:55,

15:35-15:40,

16:15-16:20

Quotation unit, USD/metric ton

Minimum price beating $0.5/metric ton (12.5usd/lot)

Single-day rise and fall limit, no

Delivery date, every business day for the last three months, and the third Wednesday of each month for the following 12 months.

Trading methods on the London Metal Exchange:

The LME does not operate a trading limit system. During the ring trading period, each commodity is traded alternately for 5 minutes per market; during the kerb trading period, all metals are traded simultaneously and the index is traded at the same time; the rest of the non-trading hours (inter-office) are electronic trading (24-hour trading).

kerb transaction

Kerb trading is also conducted in the trading circle using open outcry, but its structure is looser than the formal in-circle trading section. Brokers can order to buy and sell contracts with any expiration date, and even allow multiple traders to enter the trading circle or stand behind their seats (but they still need to stay in their designated positions within the trading circle). The main purpose of kerb trading is to allow companies to adjust the structure of positions that have not been completed in the main trading session. Early general trading starts as soon as the official LME price is determined, providing the opportunity to close the official price level. Correspondingly, general trading in the afternoon session allows companies to adjust their positions before the end of the day (not a simple balance of net long or net short orders). This flexible trading mechanism is valuable for a wide range of market participants, including DBG Forex.