Coronavirus Moves LME Trading Online, Aluminium Crashes

Coronavirus Moves LME Trading Online, Aluminium Crashes

For the first time since World War II, the London Metal Exchange temporarily closed trading in response to the ongoing COVID-19 health crisis, moving its activity online. This follows after it moved last week to Chelmsford, a small town in Essex, in order to “minimize the transit” of employees and traders through London. On March 23, the LME moved to fully electronic pricing, with prices determined on the basis of activity on LMEselect.

In operation for almost 150 years, the LME is the last European open-outcry trading venue. With its trademark circular red leather sofa, traders on the LME shout buy and sell orders in daily sessions dedicated to each metal. Trading takes place at 11:40 am and 5pm.  “The move to electronic settlement pricing will require certain changes to market behaviour. It is hence vital that members work closely with the LME prior to the transition to ensure market readiness,” the exchange said in a statement.

Some have expressed fears that, should the digitalization of trading be successful, it could become the standard.  Talking to the Financial Times, Geoffrey Sambrook, a former metals trader, said that “It’s a greater expense for everyone to have floor teams and office teams. It will be interesting to see if in a year’s time whether they bring back the Ring or inevitably it disappears.”

With the coronavirus outbreak rippling through the global economic, aluminium prices have took a nose dive since the start of March, shedding 16% since its five-month peak of $1,835 in January. It’s currently trading at $1536, a 45-month low. The discount of LME cash aluminium over the three-month contract CMAL0-3 expanded to $34 a tonne, a level not seen since May 2019, indicating abundant nearby supplies “Right now we’re seeing demand falling off a cliff, consumer confidence is shaken across the world, and commodities are responding accordingly,” said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen