Repeats October 20 column with no changes to text
By Andy Home
LONDON, Oct 20 (Reuters) - Metals are big news these days.
Gold has been punching out record highs with silver playing catch-up. Rare earths sit center stage in the trade stand-off between the U.S. and China and industrial metal supply chains are bending to the new world order of tariffs and geopolitical tension.
There was much to discuss at this year's London Metal Exchange (LME) Week seminars and parties.
Here are my big five takeaways from last week's annual metals meeting in London.
GREEN PREMIUMS
The LME's owner, Hong Kong Exchanges and Clearing (HKEx) 0388.HK, sprang an early LME Week surprise by announcing the creation of a new subsidiary in Dubai.
Commodity Pricing and Analysis Ltd (CPAL) will act as pricing administrator for the roll-out of "green" premiums, leveraging the LME's responsible sourcing criteria and trade data from digital platform Metalshub.
Metalshub transacted more than $220 million of Class I refined nickel in 2023 and since March 2024 has traded 488 tons of green-ish nickel, defined as metal with a carbon footprint below 20 metric tons per ton of metal.
The plan is to use Metalshub prices to generate a sustainable nickel premium, establishing a template for other metals such as copper and aluminium.
If there aren't enough trades, CPAL will "apply structured expert judgment" to establish premium levels, assuming they always exist.
This is an interesting foray into the world of price reporting agencies such as Fastmarkets, Argus Media and S&P Global Platts.
The pivot to Dubai also feels significant, with HKEx presenting it as a way of enhancing connectivity between China and fast-growing metal markets in the Middle East.
SMELTERS VERSUS MINERS
"You don't have security if you just have stuff in the ground." Smelting is more critical than mining, Richard Holtum, chief executive of trade house Trafigura, said at the LME seminar.
If the West wants to break China's chokehold on exotic metals such as gallium and germanium, it will need base metal smelters to produce them, Holtum said.
It is an argument that has resonated with the Australian government, which has pledged A$135 million ($87.4 million) to keep two of Trafigura's plants operating.
The backdrop is a collapse in smelting fees for copper and, to a lesser extent, zinc. China's aggressive expansion of processing capacity has squeezed margins everywhere else.
Spot copper treatment terms are negative, erasing what should be smelters' core revenue stream.
Japan, Spain and South Korea issued a rare joint statement on Wednesday expressing deep concerns over the state of affairs in the copper raw materials market.
The current benchmark pricing system, where terms are fixed annually or quarterly, may not survive in its current form as smelters look at bespoke bilateral deals or tolling contracts with miners and traders.
EVERYONE LOVES DOCTOR COPPER
Copper topped the LME seminar poll for the metal with the most price upside. It always does.
This year, though, the bulls were out in full force in London.
Arguments for higher copper prices include funds reallocating money to hard assets, a dysfunctional raw materials market and low stocks resulting from the redistribution of global inventory to the U.S.
Even self-proclaimed contrarians such as Ken Hoffman of consultancy Traubenbach Associates concede the longer-term picture is one of robust demand growth and challenged supply.
Global copper demand is set to surge 24% by 2035, according to Wood Mackenzie. The consultancy warns that disruptive sectors such as data centers could "amplify demand and price volatility beyond expectations."
A sharp jump in producer premiums for next year's deliveries to European customers helps reinforce the bull narrative.
Chilean producer Codelco will charge a premium of $325 per ton over LME cash prices for 2026 term shipments, up from $234 this year. German producer Aurubis NAFG.DE had already announced a similar-sized hike to $315 per ton.
It's a sign of the tariff times. The mass movement of copper to the U.S. to capitalise on the tariff trade means the rest of the world must pay more to guarantee supply.
ALL CHANGE IN ALUMINIUM
Jorge Vazquez, head of consultancy HARBOR Aluminum, graced the LME seminar with a maroon knitwear number and surprised the audience even more by turning bullish on the light metal.
Vazquez has been consistently bearish in previous years' appearances, but now thinks aluminium will trade above $3,000 per ton, possibly even $4,000, next year, compared with a current price of $2,765 per ton.
The change of mind is symptomatic of the market's reappraisal of aluminium supply dynamics.
China shows no sign of loosening its smelter capacity cap, and for the first time in decades analysts are starting to worry about whether supply growth will be sufficient to meet demand.
GERMANIUM
"There is none," according to Theo Ruas, head of global metal sales at U.S. specialty materials company Indium Corp, referring to germanium.
China's exports of the chip-making material have plummeted this year after Beijing tightened export restrictions at the end of 2024.
The price has soared to 25-year highs, according to Project Blue, but some buyers are struggling to get material at any price, Ruas told attendees at the consultancy's critical materials seminar.
Where germanium is today, gallium could be tomorrow. Or any of the other critical minerals dominated by Chinese processing power.
Rare earths have emerged as a central bone of contention between the U.S. and China, and Beijing has just upped the ante by adding another five elements to its restricted export list.
Even most metal traders have never heard of holmium, erbium, thulium, europium and ytterbium, but now they hold the key to global markets.
The opinions expressed here are those of the author, a columnist for Reuters.
(Editing by Paul Simao)
((andy.home@thomsonreuters.com, 44-207-542-4412 and on Twitter https://twitter.com/AndyHomeMetals))