Chief Executive Officer, London Metal Exchange, The London Metal Exchange Limited

Interview with LME's Matthew Chamberlain, Fast Forward podcast episode six, hosted by Andrea Hotter

🎥 Sep 20, 2024 📺 Fastmarkets ⏱ 54m 👁 186 views

Join Andrea Hotter, special correspondent at Fastmarkets, in the sixth episode of Fastmarkets' Fast Forward podcast as the discuss how the LME is shaping the future of metals markets, explore the intersection of global trade and sustainable energy, plus hear some discussion around the use of block limits.

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About Matthew Chamberlain

Matthew Chamberlain, CEO of the London Metal Exchange, stated in May 2025 that uncertainty over potential US tariffs on copper has created an arbitrage opportunity, with traders buying untaxed metal in Asia and shipping it to the United States before tariffs are imposed. He noted that this activity has led to some de-stocking in Asia and trans-Pacific shipments, describing the LME’s global network as enabling such trades. Regarding competition, Chamberlain said that while exchanges compete, initiatives like the Shanghai Futures Exchange opening to foreign investors are positive for the global industry, as they create more arbitrage opportunities. Chamberlain has previously emphasized the LME’s role in promoting responsible sourcing. He said the exchange has introduced requirements that metals must be ethically sound, not just metallurgically sound, and has implemented rules barring metal linked to child labor or conflict finance. On sustainability, he stated that metals must be sourced responsibly to be part of the solution for the energy transition, and the LME has partnered with Metalshub to bring transparency to the carbon footprint of traded metals.

Source: AI-verified profile updated from Matthew Chamberlain's recent appearances. Browse all interviews →

Transcript (28 segments)

Matthew Chamberlain27:43

So far in 2024, obviously above '22 and '23, but actually now rivaling 2020 and 2021 in terms of average daily volumes, which to me suggests that the vibrancy of that market is back. I think that's a combination of the steps we've taken as a result of the independent review and the significant investment we've made, but frankly also the goodwill of the market. I think we've really been grateful for the way that the market has stood by us in this. They've encouraged us on that reform journey. We spend a lot of time talking about class two with our stakeholders, and in the end what they told us is, 'Look, LME, just concentrate on the class one, take the steps to rebuild the liquidity there, and we'll support you.' They've been true to their word. We've taken the steps that we needed to, and they have reciprocated by bringing back liquidity to the levels that I mentioned.

Max28:40

You mentioned a reform journey, so I'd like to take a bit of a diversion here. I think it's probably an appropriate segue. There's been a big announcement by the LME recently, and it would be wrong to ignore it today, so I'd like to ask you about it if you don't mind. The LME is very much an industrial exchange with the physical community at its heart. It's very unique in how you trade its contracts, but it's been trying for some time to attract more of the financial investment community. Efforts in the past have arguably not been a huge success, though. But at the start of September you issued a white paper laying out a plan that you hope will change all of that. So Matt, over to you: what exactly is the LME planning to do?

Matthew Chamberlain29:22

Thanks for mentioning, because this is an important topic. Maybe for those less familiar with the LME, we're a very differentiated exchange because most exchanges allow you to buy and sell a contract commodity for a single point every month. So you might have a November copper contract and a December contract and so on. The LME, again going back to that history that I mentioned earlier, has this incredible date structure where you can buy and sell metal for any day from one day forward, so tomorrow through to three months, any week from 3 to 6 months, and any month beyond that. And that's a really important feature for our physical users, and that's never going to change. That's a very bespoke request. But within the daily date structure, there is a monthly date structure embedded at the LME. The third Wednesdays of each month are the established convention for how you trade the LME in a monthly manner if you're trying to trade it like all of those other exchanges, and in particular financial participants like to keep their positions and open interest on those monthly dates. Actually, this is really relevant for the broader debate because we're in, I think, this incredible position in the metals industry that everybody knows metals are going to be crucial to the transition that we've just been discussing. An increasing number of financial players want exposure to those metals. The LME is the natural place for that to happen, but they look at our market structure and they say, 'Oh, that's just a little bit complicated, that's a little bit difficult, we're going to go and look elsewhere.' So all we've announced in the white paper is that for those monthly dates, particularly those financial users who want exposure to those monthly dates, we're going to align with our global peers, with other exchanges, and have what we call a block limit. And what that means is that if you're trading a small amount of those third Wednesdays, that needs to be shown on our central electronic trading system, LME Select, rather than simply being a bilateral trade between a client and a dealer. It all sounds very market structure and technical and geeky, but what it means at heart is that if you log on to LME Select, our electronic system, you'll see what we already have, which are those six contracts which are crucial for the energy transition, and you'll see good liquidity and good pricing for each of those monthly dates where you might want to invest to get exposure to those. If this is a thematic theme that you want to participate in, there's a lot of work to do, a lot of industry engagement, etc., but we think that what we've announced is going to really help all those players get better access to metals, which I think is going to be crucial over the next 10 years.

Max32:36

I'm curious why you've decided to do this now. Obviously you tried a decade ago to attract financial players and incentivize electronic trade, but it backfired, caused a lot of friction with members, and a lot of business moved to the OTC market. I'm wondering why now, and is this in any way linked to the nickel situation in 2022 and actions that the LME committed to take to improve transparency after that?

Matthew Chamberlain33:00

Certainly with the nickel situation, and I think people will know we commissioned this independent report from Oliver Wyman, and one of the recommendations that it made is that the LME should look to standardize its market structure where appropriate without loss of functionality to existing clients, because there is a sense that the more standard your market, the more liquidity you will get, and that provides a liquidity pool in which everyone can participate even when pricing is becoming more volatile. Certainly the Oliver Wyman report does draw a linkage, and we should respect that. But we have now embarked on this modernization journey, and yes, that probably did start with some of the immediate initiatives around nickel, things like OTC disclosure, things like our daily price limits aligning more with some other markets. Then we did our closing price reform. It's really that momentum, that confidence, then move on to the next market modernization, market improvement step, which is this enhancing liquidity paper. There is a degree of linkage to nickel, but I think it's more a story of continual improvement, continual modernization, and making sure that when this energy transition fully arrives, we are ready. It's not just the LME as an exchange, as a business, we as a community, right, our members are ready to benefit. Because I think we would all regret it if this incredible decade for metals does manifest itself and we're not as good as we can be to benefit from that.

Max34:42

And why are you focusing only on small trades? I was curious why not bigger.

Matthew Chamberlain35:37

The OTC market, this is really about how members give price exposure to their clients. There's two ways of doing it. One is they can give them an LME client contract, as we call it, which is registered with our exchange, booked at our clearing house. And then the other is the over-the-counter or OTC market. We have seen over the last 10 years more and more business go to the OTC market. I think frankly because in many cases it's easier for members or banks to manage, they can put their own margin requirements on, etc., so it just gives them more flexibility. Our approach to the OTC market is very clear, which is absolutely any member's right to go and service their clients on an over-the-counter basis. Not for me to say that that's wrong. But if those OTC contracts embed LME prices, which in the metals world they very often do, we think it's fair that people trading OTC play their part for the overall market. So back in 2018 we put in place what we call the OTC booking fee, where we ask people trading OTC on the basis of our prices to pay to embed those prices, to contribute towards the infrastructure at the LME that generates and checks and validates those prices and makes them as representative as they are. And with the white paper announcement, we're taking a similar approach, which is saying if you're running an OTC trade below the block limit, we would like it to be subject to the same transparency requirements as an on-exchange trade. So you can still give the client an OTC fill, but we would expect the underlying trade to be showed on LME Select, so it builds liquidity, builds pricing, and contributes to the value of those LME prices that then go back and underpin the OTC.

Max35:27

We've seen a lot of business move to the OTC market over the years. In your own words, what's wrong with people using the over-the-counter market?

You know, one statistic I found fascinating in the white paper was that less than 1% of LME volumes are traded in the ring, 48% are traded electronically on LME Select, which I actually thought would be a lot higher, and the remaining majority is traded bilaterally inter-office, which typically means negotiated in the telephone market. How much do you expect electronic or LME Select volumes to increase as a result of this plan? I'm just wondering how transformative these changes are going to be.

Matthew Chamberlain38:01

It's a great question, and it's not one that we necessarily have a target on, because I'm not really going for a particular percentage. What I want is a market where every client who wants to trade electronically can do so, and every client who wants to take advantage of that bespoke date system can do so as well. Other exchanges, their electronic proportion is 90-95%, and that makes sense for them. That's probably never going to be the case for us because all of those physical averaging trade cash prices, broken dates as we call it on the LME, they're always going to be bespoke, probably not suitable for electronic execution. That'll always be in our telephone or inter-office market. We have no problem with that being a reasonable percentage of the business. What we just want to make sure of is that where the client wants that ability to trade electronically, they can. The story that I always tell here is that obviously I spend a lot of time talking to clients, and sometimes I'll see several clients a day. And you can absolutely have an experience where you see one client in the morning and they say, 'I wanted to buy some December copper on your electronic market but there was no liquidity there.' You go and see someone in the afternoon and they say, 'I want to sell some December copper on your market, there was no liquidity there.' And you think, guys, I just need to put you in the same room and you can talk to each other. But that's what the LME system should be doing, right? The LME system should be bringing them together. But the reason that it's not there is nobody wants to go first. You don't want to put bids or offers into an empty screen because then you're quite exposed. And again, we have to learn from other markets. Other markets solved this problem long ago by simply making it a rule that that business comes on, so the guy who's buying knows that the guy who's selling is going to be there and vice versa. That's all that we're looking to do here.

Max39:51

Sounds a bit like online dating. So Matt, how long do you think it's going to take before we see any meaningful change in volumes? I mean, is this an overnight game or a slow burn situation or something in between?

Matthew Chamberlain40:05

No, even just implementing this is going to take about a year because we need to do this in a structured and respectful manner. We've come out and said this is what we want to do, but that doesn't mean there's not going to be a lot of conversation. We're going to set up member working groups to make sure that the new rules will operate effectively with all the different ways that members do business. We don't want to start any business hitting the market and then we'll need rule changes. We'll consult on those, and then members will need to make systems changes. You're not going to see this implemented until the back end of 2025, and it wouldn't be right for us to rush it. So there's not going to be an overnight story, but I think it could be quite transformative once these rules are in. I think we'll quite quickly see that business start to form on the electronic market. All those people I mentioned who you tell they don't have the liquidity, I think they'll be a lot happier. They will feel their execution experience is better. And then, and this is what's really crucial, those players who love the idea of metals exposure, love everything we do on the physical side and the price relevance and the macroeconomic relevance, but just can't get over our market structure, they will look at it and say, 'Ah, you know, the LME has done something here,' and we believe that they will come in and participate. And if we were speculating for new business while harming existing customers, obviously I wouldn't do it. But what I love about this is I strongly believe this can provide better execution for people who want it on third Wednesdays, a route into the market for people who don't currently trade it, without in any way harming existing physical traditional players. And actually I think they will benefit as well from the overall enhanced liquidity in the market. I feel pretty confident about this balancing out, but also important not to kill the goose that lays the golden eggs.

Max41:57

Matt, every episode I ask the same couple of questions to our guests. So firstly, what's one thing we might be ignoring but we should be paying attention to related to the LME?

Matthew Chamberlain42:10

So I would go back to LME Passport, right? And you don't have to have login, you can just go to the LME Passport website, there's a link on our web page, and see the disclosure that's there, the data, the curation. Because I think it is a great resource for understanding how the industry is beginning to approach these questions. See the fantastic disclosure that comes from the producers. We don't always talk about it, but I think it's a great sign, not just of what the LME can do, but actually underlying that data, what our industry can do. Because I can't think of an industry that in a 10-year period effectively has undergone such a fundamental embrace of sustainability, of responsible standards, while at the same time continuing to produce metal that drives all of our everyday lives and drives the energy transition. So I'm actually really proud when I log on to Passport of what that means and being part of an industry that doesn't always get the best rap but that does a huge amount of work on making sure that we have a sustainable future.

Max43:23

All right, I'm making a note to bookmark the Passport page. And secondly, if you had to fast forward a decade, what do you think the LME is going to look like?

Matthew Chamberlain43:33

The history of our exchange, coming back to 1877, and businesses do not survive, markets do not survive for that period of time unless they adapt. And the adaptations the LME has been through, be they metallurgical adaptations, the conversion from sterling to dollar contracts, which I wasn't personally around for but I understand was pretty controversial. We have adapted and changed and evolved at every stage. And yes, there's always been discussions, there's always been objections, but the community has rallied round and moved on. And so the LME of 10 years' time is going to have all the great things that we have right now. It's going to have that date structure, it's going to have the daily physical pricing, it's going to have the warehouse network, it's going to have the investment in the physical that I don't think anybody else could offer to the extent that we do. But it's also, I believe, going to have a really easy way for those who want to have participation in the metals industry to do so. And I think if we can continue to blend all of those things together like we've done for 140-something years, if we can continue to channel that spirit, I think it's going to be an incredible place to trade, an incredible place to work, and I'm really excited about it.

Host44:57

And now let's take a quick break from the interview to hear from one of our in-house experts here at Fast Markets.

Imogen Dudman45:10

Thanks Andrea. I'm Imogen Dudman, a senior aluminium reporter here at Fast Markets, working out of our London office. As Matt said, the LME first began its Passport at the end of 2021 with aluminium, and the recent consultation on the exchange's proposal to integrate mandatory emissions reporting for all LME-listed brands of aluminium is of course particularly apt as the industry prepares itself for the full adoption of CBAM regulations in January 2026. Aluminium has been one of the most advanced base metal markets across recent years in its work to demonstrate its sustainability credentials and will generally seek to decarbonize its production. As Matt referred to previously, the LME Passport of course covers not only factors such as pollution mitigation and other climate change related topics, but also measures such as human rights assurances and risk management. If we focus more on the sustainability side of things for now, let's talk a little bit about what low carbon aluminium looks like at Fast Markets and within the wider industry. For anyone who isn't an avid Fast Markets low carbon aluminium fanatic, Fast Markets' methodology currently defines low carbon aluminium as maximum of 4 tons of CO2 equivalent per ton of aluminium produced under scope 1 and 2 emissions. To give this some context, according to data released by Fast Markets' research team, average CO2 emissions in primary aluminium produced in Europe currently stands at 6.7 tons, while average Chinese production stands at 20 tons of CO2 per ton of aluminium produced. The global average cradle-to-gate emissions in 2022 sat at 15.1 tons of CO2 per ton of aluminium produced, according to data from the International Aluminium Institute. The industry has been working to clean up its act, and the global average in 2022 dropped by over 4% from 15.8 tons of CO2 the previous year. Fast Markets launched its aluminium low carbon differentials back in March 2021, and when you look at the market now, you can see just how far things have progressed. Not only in Europe: in 2021, aluminium producers were working to decarbonize their production, but consumer appetite to specifically procure lower carbon brands was less widely adopted. Fast forward three and a half years, and we see increasing consumer demand for green production both inside of Europe and beyond, partly as a result of company-specific ESG policies but also as a result of increased legislation implementation such as CBAM. This has brought with it the emergence of green premiums being achieved for certain low carbon transactions. Fast Markets has since launched a number of different low carbon references, including differentials for both the United States and also for Asia. European consumers, traders, and producers are and will need to keep an ever closer eye on low carbon credentials amid the ongoing transition to full adoption of CBAM, whereby importers must submit quarterly reports on the quantity of aluminium goods imported into the EU and the greenhouse gas emissions released as they were produced. Following the recent energy crisis and periods of low regional demand, the European market has become increasingly reliant on imported tons, so it'll be interesting to see for sure once CBAM gets enacted in full force how the market reacts and continues to evolve in this low carbon space.

Host48:35

And now back to the interview.

Max48:39

So Matt, to finish today, I'm going to pose a couple of questions that I sourced in advance from social media. So here is the first one for you: importing countries are pursuing strategies to reduce their supply chain risks, seeking supplier country diversity. How do you see traders adapting?

Matthew Chamberlain49:00

I think that's a really good question. The LME is at its heart a global market, and our history has been one of expanding the global pool. So it's actually funny, it's only in 1989 that we opened LME warehouses in the US, it's only in 2000 that we opened LME warehouses in Asia, and you think of that LME network now, and that globalism is a big part of who we are. I'll be very honest, the trends towards deglobalization that we've seen are challenging for a global business model like ours, and we see them in sanctions. You know, we've done a huge amount of work this year in terms of ensuring sanctions compliance around Russian metal. I won't deny that these things are at their heart a little bit at odds with the LME's concept of a global duty unpaid contract, but I think we've adapted well. In terms of supplier diversification, if I'm a consumer and I want to make sure that I'm sourcing my copper from a variety of different countries so I don't become dependent on any one country, or maybe I have particular countries that I feel more comfortable with, that's absolutely something that can be done. We have a global price, our members have an incredible business in warrant trading, so you can go to one of our members and say that you want LME warrants from specific countries, and they will go and find them for you. And the great thing about our copper contract, for example, is we have copper brands from all around the world. So if you want US copper, if you want Chilean copper, if you want German copper, if you want Chinese copper, you can get that on the LME. You may need to go and do some warrant exchanges and work with a member, but that's a service that's offered by the ecosystem. When I look at it, yeah, critical minerals are changing to some extent global trade flows, and we are a global market, but we then have this value-add capability that our members can provide on sourcing from particular countries, and I think we're very much fit for the future on that aspect.

Max51:03

All right, okay. So the next question was: as procurement focuses more on emissions, how are systems evolving to tie carbon metrics to refined products? Refined products can mean different things to different people.

Matthew Chamberlain51:16

We operate at the smelter level, so if by refined you mean what comes out of the smelter, then the LME Passport data applies directly to that metal. If you go further downstream, say you go into cable or wire or air conditioners or whatever it might be, then our vision is that that LME Passport data can be an input into the emissions tracking and management systems of the fabricator, and that they have one click, they can connect to LME Passport, they can suck in the emissions data for all of the metal that's going into the furnace, and that's then an input to get to add to their total footprint. The whole work around scope 3 and supply chain is just really fascinating right now, and we think that LME Passport is right at the center of that when it comes to understanding the footprint of your input materials. Yeah, I suspect the question was designed around that further down the supply chain, so it's good to know you're looking that far ahead and working that way.

Max52:13

Matt, obviously LME Week is coming up, it's on our doorstep, the annual gathering of the global metals community in London. Just in your own words, what can we expect? What are the highlights?

Matthew Chamberlain52:24

LME Week, I always look forward to it, but in some ways it's more the community than the LME itself. So we obviously organize the seminar and then we have our dinner, which is always a lot of fun. Talking about market modernization, for the first time we had a sort of dinner entertainment last year, we had Riverdance, which was extremely well received, and it's very difficult to match that, but we do have a surprise entertainment which I'm not allowed to reveal, but we're very much looking forward to that and I hope everyone at dinner enjoys it. I always think that the real value for me of LME Week is meeting everyone who uses our market, and those who don't use our market, and hearing their views. We've deliberately put out the white paper with a bit of notice so that people can start forming their views, and I'm sure we'll be hearing a lot of feedback during LME Week, and really interested in that. Sure, people will have views on a whole range of topics, and that's always very valuable. We'll be in listening mode to hear what people have to say.

Max53:25

Yeah, well I am looking forward to it too, seeing everybody dressed up in their tuxedo penguin suits and formal dresses is always a little bit different from the day-to-day. So Matt, thank you so much for today. We've run through some pretty technical aspects of the exchange and you have simplified it for us considerably, so I have really enjoyed this. Thank you very much.

Matthew Chamberlain53:47

I really appreciate the opportunity. Great to catch up and see you in LME Week.

Max53:50

Perfect. Finally, we'd like to thank you for listening over the course of this series. This has been the final episode of our current series. We're going to be taking a short break from the podcast and we'll be back in the new year with a brand new series. If you're going to miss us while we're gone, why not go back and enjoy listening to any episodes from the first series you might have missed or want to listen to again. You'll find them in the archive. You know the drill: you can find them on Spotify, Apple Podcast, and anywhere else you listen to podcasts. Just search for Fast Forward. Tell us what you think in the comments and don't forget to leave a review. And if you're going to be in London for LME Week, the Fast Markets team will be out in force, so please do come and say hello to us. Until next time.