The History of the London Metal Exchange

Commodities exchanges simply don’t come with any more prestige and pedigree than the London Metal Exchange. Still as relevant as it has ever been, the history of it makes for some interesting reading.

london-metal-exchangeFormally established all the way back in 1877, the London Metal Exchange was known for being truly innovative during its fledging years, as international metal trading once made up a key part of the British economy. The arrival of the industrial revolution in the early 19th century resulted increased copper and tin markets, helping sustain the market. Through such time the UK would be considered the most technologically advanced country on earth, due to how much and how well the country was importing products from abroad. However, as time passed the metal industry would expand to all four corners of the globe and problems would begin arise. Metal traders were now in a position where they were losing the ability to tract metal pricing, with it taking months to ship, and costs related to shipping becoming more prominent. Technology would then enter the equation to help out in the forms of telegraphs, opening up key lines of communication and laying the foundation for the London Metal Exchange we see today.

After the establishment of the three-month delivery method, new metals would arrive that would allow the London Metal Exchange to flourish considerably. Copper and tin would be joined by the likes of lead and zinc in 1920, pushing the London Metal Exchange through two world wars and aiding market growth. After years of consistency, the market would enter a metamorphosis through the late 1970s and early 1980s as high-grade contracts became increasingly commonplace. Nickel would then join the exchange around the same time, before aluminium alloy would join the fray in 1992. From two metals to over half a dozen, the London Metal Exchange would almost come full circle prior to the dawn of the 21st century.

When the digital era arrived the London Metal Exchange embraced all the new technology that came with it. Trades were now conducted digitally; theoretically doing away with the middleman, but not just that, trades could now be completed in a mater of seconds. The market would also open up to a point that anyone with an Internet connection and a trading platform could start creating a metals portfolio. The LME Minis would be introduced for zinc, copper, and aluminium in 2006 to offer simplified trade proceedings. While in 2010 two minor metals would be added to the market in the form of molybdenum and cobalt. Setting a precedent for the future Hong Kong Exchanges & Clearing Limited that would eventually acquire the London Metal Exchanges in late 2012.

The London Metal Exchange is classic, modern, and industry defining of that there is no doubt. But for all that it offers in 2015 to traders, what can’t be ignored is the market’s fascinating history. Emerging from the late 1800s and surviving every war and recession put in front of it, the London Metal Exchange has proven itself time and time again to be a market that is here to stay.

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Alexander Bowring is a London based writer and a Southampton Solent University Screenwriting graduate. He has worked alongside TV personality and Telegraph feature writer Alison Cork, whilst also having produced content for ITV, This Morning, Canvas8, Who’s Jack, Alison at Home, and Bonallack & Bishop Solicitors. Alexander also has a keen interest in investments.

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