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Physical market services

The London Metal Exchange (LME) has been helping metal producers and consumers manage their price risks since 1877.

From our unique forward prompt-date structure and large lot sizes, to trusted global reference prices that genuinely reflect supply and demand and our world-wide warehouse network, the physical metals market is very much part of our DNA.

It is this blueprint shapes almost all facets of our business. Most producers and consumers, that is, makers of metal and makers of things out of metal, use the LME to hedge their price risk.

The below outlines some of the other elements that are essential to the metal community and thus essential to us here at the LME.

Price risk management

Producers and consumers use the LME to hedge their price risk. The time between a physical contract being agreed and the time it is settled can span days, weeks, months and years - and in that time a lot can happen to the price of a metal. It is this risk that the physical market seeks to mitigate.

Reference price discovery

We at the LME pride ourselves in providing the world with daily, transparent, credible and real reference prices. The prices are discovered using risk capital and are truly reflective of global of supply and demand. The ability to hedge is predicated on these prices.

Price convergence with physical

LME contracts are physically settled via our global warehouse network. This is key because it means that futures prices discovered on our markets converge with (are reflective of) physical metal.

Global warehouse network

We don’t claim to replace metal producer and consumer supply lines, but our network of licensed storage facilities provides the metals community with a market of last resort and helps ensure our reference prices keep inline with physical prices and are global.

Physical settlement

Only brands of metal that are actually used by the physical market are accepted for good delivery. This coupled with ongoing testing, reference to numerous global standards and relatively large lot sizes means our contracts are always relevant.

Flexible prompt-date structure

LME contracts can be traded daily out to three months in the future, weekly to six months and monthly out to 123 months. No other market offers such a range of forward dates and no other market provides the metals community with such flexibility in matching and hedging their real-world deals.