Key takeaways
- The LME (London Metal Exchange, founded in 1877, owned by the HKEX group since 2012) is the world's reference exchange for non-ferrous metals: copper, aluminium, nickel, lead, tin, zinc, plus alloys and other contracts.
- The price that matters for physical contracts is the Official Price, set each trading day in the midday open-outcry session (the "Ring"); the Cash Settlement is the seller side (ask) of the official Cash.
- Cash means delivery in two business days; the "three-month" (3M) is the rolling 90-day date: the gap between the two (contango or backwardation) tells you the state of the physical market.
- What a company pays is never the bare LME price: add the regional physical premium, the currency conversion and the delivery terms.
- FT Mercati publishes the previous day's Official Cash (ask) on the website, converted into euros at the same-date exchange rate; platform subscribers get every LME price — Cash, three-month and other maturities, Closing, spreads and stocks — in real time.
What the LME is and why it sets the world price
The London Metal Exchange is the oldest and most important non-ferrous metals exchange: founded in 1877, since 2012 it belongs to Hong Kong's HKEX group. It trades standard contracts on copper, aluminium, nickel, lead, tin and zinc — the six metals you follow on FT Mercati — plus aluminium alloys, cobalt and other instruments.
Its strength is the network of approved warehouses around the world: every contract can, in principle, end in physical delivery of certified metal in an LME warehouse. That link to real metal is what makes LME prices the benchmark of supply contracts: producers, processors and merchants worldwide buy and sell "at LME plus premium".
Official, Closing, continuous: the LME price family
The LME does not produce one price but a family of prices. Trading runs all day on the LMEselect electronic platform and in the inter-office market; but the reference prices are born in the "Ring", the historic open-outcry session, one of the last left in Europe.
Official Prices are set in the midday session: for each metal, a bid and an ask on Cash and on the three-month. The Cash Settlement — the reference of physical contracts worldwide — is the ask of the official Cash. At the end of the day come the Closing Prices, used mainly for margining and clearing valuations.
When you read an LME price on FT Mercati you are looking at the Official Cash (ask): the number that ends up in invoices. On the public site, under the LME data-licensing rules for free distribution, that is all there is: the previous day's Official Cash. Platform subscribers receive far more, in real time: every LME price — Cash, three-month and the other maturities — plus the Closing Prices, the spreads between maturities and the warehouse stocks, session by session. Whoever decides metal purchases and sales sees prices earlier, and sees them all.
Cash versus three-month: contango and backwardation
Cash is delivery in two business days; the three-month (3M) is the LME's peculiarity: a rolling date always falling about 90 days from today, inherited from the era when three months was the voyage of copper from Chile and tin from Malaya.
The gap between the two prices is a thermometer of the physical market. When the three-month trades above Cash (contango), the market is relaxed: metal is available, and whoever stores it charges for the cost of time. When Cash trades above the three-month (backwardation), metal is scarce now: whoever needs it immediately pays up — often a signal of low stocks or tight physical demand.
Alongside prices, the market watches LME warehouse stocks: levels and inflows/outflows give an indication of metal availability — a useful reading, not a mechanical rule.
From the LME price to the price you pay
No company pays "the LME price" alone. On top of the exchange price — which is for standard metal delivered in an LME warehouse — comes the physical premium: the regional surcharge covering freight, local availability, duties and product shape. The premium moves on its own, and in times of logistical stress it can matter as much as a move in the exchange price.
Then there is currency: the LME quotes in dollars per tonne, European contracts settle in euros. The correct conversion pairs the price with the exchange rate of its own date, and that is how FT Mercati works: every euro price on the site is converted at the EUR/USD rate recorded at the LME on the same day as the data — never one day's price at another day's rate.
In supply contracts the typical reference is an average: the average of the Official Cash prices of the delivery month (or the month before), plus the agreed premium. That is why the daily history matters more than any single price: the account is settled on the average.
When the mechanism jams: the nickel 2022 lesson
The LME price is robust because it is anchored to physical metal, but not infallible: in March 2022 nickel doubled within hours as huge short positions were forced to close, and the LME suspended trading and cancelled that morning's trades. Daily price limits and stricter position rules followed.
For metal buyers the lesson is practical: read the exchange price together with its context — stocks, the Cash/3M structure, market news — and let contracts say what happens if the reference is missing or suspended. It is the kind of daily reading our analysts do in reports and webinars.
Frequently asked questions
Why is the LME price on the site from yesterday?
Because LME data licences distinguish free distribution from real time: on the public site FT Mercati shows the previous day's Official Cash — the figure that governs contracts. Platform subscribers instead follow the full picture in real time: Cash, three-month and other maturities, Closing Prices, spreads and warehouse stocks.
What is the difference between Official and Closing prices?
The Official Price is set in the midday Ring session and is the reference of physical contracts (the Cash Settlement is its ask side); the Closing Price arrives at the end of the day and serves mainly margining and clearing. Metal buyers and sellers watch the Official.
What do contango and backwardation mean?
Contango: the three-month trades above Cash — a relaxed market with metal available. Backwardation: Cash above the three-month — metal is scarce now and immediate delivery commands a premium. The switch from one to the other is among the market's most watched signals.
Can I use the LME price directly in my contracts?
It is worldwide practice: state the reference (normally the average of Official Cash over a period), the agreed physical premium and the euro conversion rule. What matters is fixing precisely which price, over which period, at which exchange rate.
Does the LME price also apply to metal bought in Italy or elsewhere in Europe?
Yes, as the base: the local price is the LME plus the local physical premium and delivery terms. For alloys and semi-finished products of the Italian market there are dedicated references, such as the Milan indexes published by FT Mercati.
Sources
Institutional references for this guide:
This guide is market information, not financial or investment advice: for your company's decisions, consult your advisors.