London Metal Exchanges Future Plan

The LME (London Metal Exchange), a global platform for marketing some metals, has been trading in non-ferrous metal for last 130 years. But now it is planning to include steel in its product range as a part of its 2 by 2 growth strategy.

Steel will be dealt by Over the Counter contracts. According to Martin Abbot, Chief Executive, LME, the members of the company are not opposing this decision. The only thing they desire is the maintained liquidity of market which is not supposed to be disturbed as there is sufficient demand for the instruments, as the CE says. He also ensured the minimized fees and maximized profit to the shareholders.

Establishment of the LME in 1877 is a good example of effect of the Industrial Revolution of 19th Century. Initially it was dealing with Copper but Lead and Zinc were added in 1920. The exchange was closed during the World War 2 and reopened in 1952. Other metals are introduced in subsequent years like Aluminum in 1978, Nickel in 1979, Aluminum Alloy in1992 and the base metals in 2000.

The LME wants to be benefited by the competitive advantage in trading of steel. It wants to include steel to strengthen its leadership and growth. Steel Industry has a good pace of growth from 2003 and a better future.

Statement from Mr. Risaburo Nezu (Japan), Chairman of the OECD Steel Committee(According to OECD report on 11/8/2006)The global steel market is enjoying its fifth consecutive year of strong output and demand growth. The outlook for 2007 is expected to remain relatively bright, but a less vibrant world economy should slow demand and production growth, according to industry and government officials at the OECD's Steel Committee meeting in Paris on 7-8 November 2006. OECD means Organization of Economic Co-corporation and Development.

The roles played by the LME can be summarized as below:

1) Providing Market: It provides the participants a global and safe platform to trade metals.

2) Pricing: It provides reference prices which are globally and widely used.

3) Physical delivery: It also facilitates warehousing of metals to enable the participants take or give physical possession of metals.

LME believes that a significant portion of Steel Industry wants a standardized pricing and marketing system of steel. LME has already started working on pricing of steel with Platts. As per Platts report pricing will cover steel related product which means finished, semi-finished and raw materials used in steel making. The pricing will be applicable globally but determined by prices of some focus areas i.e. Europe and USA. Daily pricing is being considered as preferred frequency.

For developing future contracts for a particular industry in accordance with their specific needs their involvement plays a crucial role. Their feedbacks and inputs are very important for LME and it has already received support for the development of steel futures from a number of major car companies, major traders, and the packaging industry, parts of the construction industry, service canters, producers and also LME member firms.