LME backs Mercuria-led blockchain consortium to track global metals

System will enable buyers to track their metal and help traders secure their inventory

Henry Sanderson

© Reuters

The London Metal Exchange has backed a consortium of metals traders and banks to build a blockchain-based system to track the trade of physical metal, according to people familiar with the effort.

The world’s largest metals trading venue has supported the group led by Swiss trader Mercuria, which would provide a better picture of the flow of metals around the world, the people said. Dubbed “Forcefield” it also includes banks such as Macquarie and ING.

The effort would enable industrial consumers to better track the source of their metal and also give metals traders secure ownership of their inventory.

It comes as companies face growing pressure from investors and NGOs to detail the environmental and social impacts of their supply chains.

While the LME closely tracks metal such as copper, zinc and aluminium that sits in its global network of warehouses, a far larger amount of metal is traded and stored outside of the exchange. In addition the LME has no approved warehouses in China, the world’s largest consumer of metals.

That makes it harder for traders and consumers to be certain about the supply of their metal and also to assess broader supply and demand conditions.

Matt Chamberlain, chief executive of the LME, would not comment on the Mercuria initiative but said the metals industry needed to agree on a tracking and storage system based on blockchain, the technology behind bitcoin.

Blockchain’s distributed ledger technology would reduce the need to have one central owner of the database, who would have too much private information to make it viable.

In 2016, the LME launched an electronic tracking system known as LMEshield, but it has not received widespread adoption by the industry.

In a blockchain-based system “you know where your metal is, you have proof of your metal, but nobody can see what your metal is and where your metal is,” Mr Chamberlain said.

“That is a fantastic vision for this market and if we as an industry can come together and deliver that it will be a huge win for the metals trading community.”

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