London Metal Exchange (LME)

History of the London Metal Exchange :

The London Metal Exchange Company was formed in 1877 but its origins trace back to the 16th century when the traders in metal and other commodities met on a regular basis in the newly opened Royal Exchange in London.

When Britain became the major exporter of metals in the 19th century, the Royal Exchange filled up with so many overseas commodity merchants that it became difficult to do business. The necessity to find premises for trading arose. During the Industrial Revolution when Britain started importing metals from abroad, trade at irregular intervals put merchants and customers at risk. Therefore, the London Metal Exchange was formed to create a single market, recognize times of trading, and standardize metal contracts.

The Exchange was closed over the World War II and reopened only in 1952.

The market of metals and commodities has constantly changed and the LME has adopted successfully to the changes. At first, only copper was traded. Lead and zinc gained official trading status in 1920. The copper contract was upgraded in 1981 and then in 1986. While the lead contract has remained unchanged, zinc has undergone a number of upgradings. Aluminium was introduced in 1978 and nickel commenced trading a year later. In 1999, a silver contract was launched. Whereas, base metals are traded in the LME since 2000.

In April 2000, an index contract - LMEX - was introduced. It is based on the six primary metals traded on the Exchange: aluminum, copper, lead, nickel, tin, and zinc. Extensive statistical analysis of the performance of LMEX has been executed using historical prices dating back to the 1970s.