Metal-sourcing rules tightened

THE London Metal Exchange could remove companies from its list of approved metal suppliers if they fall short of industry standards, after an outcry over cobalt mined by children.

The exchange will issue principles for responsible sourcing in coming months and producers will have to show their metal meets industry standards that conform with the new LME guidelines, sources familiar with the matter said.

“The LME has to be a policeman. It can do that by making sure industry standards on child labour and conflict minerals are being met, that there is auditing and certification,” said an LME committee member.

The responsible sourcing of metals such as cobalt has come into focus as manufacturers scramble to secure supplies of the key component in rechargeable lithium-ion batteries before an expected surge in electric car sales.

Carmakers such as Volkswagen have asked suppliers to ensure cobalt does not come from child labour. Concern that some of the metal in Lme-approved warehouses might be tainted has led some consumers to shun its contracts.

To make progress on responsible sourcing, the LME sent a survey to producers in November asking about the sourcing, auditing and certification of metal that could be delivered against LME contracts. Responses were due by December 1.

The process of establishing the principles, adopting standards and allowing producers to meet the requirements could take two years, possibly longer.

The spotlight has also fallen in recent years on tin, another metal traded on the LME that is used in electronics and can come from conflict zones or artisanal mining areas in Africa.

Rights group Amnesty International brought the issue to a head with a 2016 report detailing the use of child labour in artisanal cobalt mines in the Democratic Republic of Congo. Last year, it said some major electronics and car companies were not doing enough to clean up their supply chains.

In December, Nanjing Hanrui Cobalt, the main provider of raw material to Lme-approved cobalt supplier Yantai Cash, said some of its cobalt came from artisanal mines in the DRC and it couldn’t rule out that child labour might have been used.

Worries about metal from Yantai Cash emerged in June and prompted some in the industry to call for it to be suspended from the LME list. Yantai’s inclusion in the LME approved list at the time created a discount for the price of LME cobalt against prices gathered by Metal Bulletin, a trade publication, sources said.

in December, Yantai Cash joined China’s Responsible

Cobalt Initiative, which was formed by the China Chamber of Commerce of Metals, Minerals & Chemicals Importers & Exporters and also includes major end-users of cobalt such as Apple and Samsung.

Liu Xiaohan, manager of the international trade department at Yantai Cash, said the company appreciated the importance of building a responsible cobalt supply chain and was taking measures to address the challenges.

Yantai was developing a responsible purchasing policy, carrying out third-party audits, preparing annual progress reports and making necessary information disclosures, Liu said.

China’s Responsible Cobalt Initiative is calling on companies in the cobalt supply chain to recognise the Organisation for Economic Co-operation and Development and Chinese guidelines and align their policies with them.

“The LME won’t set standards. That will be done by bodies like the Organisation for Economic Co-operation and Development and the Cobalt Institute, but they can try to make sure standards on the environment are met and human rights are protected,” a cobalt trader said.

“The Cobalt Institute is working on what it calls the Cobalt Industry Risk Assessment Framework and is expected to roll it out this year,” said David Weight, the institute’s president.

Last year, the International Tin Research Institute published a code of conduct for its members. The International Council on Mining and Metals also has guidelines on responsible sourcing. – Reuters