1. What the LME Cash Settlement Actually Represents
The LME cash settlement is the official spot price for refined, LME-grade base metal delivered to an LME-approved warehouse on the second working day after trade. It is published in US dollars per metric tonne and re-fixed every London trading day at 12:30 GMT during the second Ring session. Almost every physical scrap contract written in Europe references this number.
Scrap is, by definition, contaminated refined metal. To turn scrap back into a tradeable ingot, a smelter must remelt, de-gas, alloy-correct and cast the material — each step consumes energy and produces yield loss. The discount between LME and the scrap price represents that recovery cost plus the smelter's margin and the trader's commercial layer. Knowing the LME number means knowing 80% of what drives the quote in front of you.
2. Percentage Pricing vs Flat Differential Pricing
There are two ways European exporters quote scrap. The first is percentage pricing: 'Tense at 88% LME CIF Nhava Sheva' means the price equals 88% of the LME aluminium cash settlement on the date of bill of lading, delivered to the Indian port. The advantage is that the buyer is automatically hedged against LME moves between quotation and shipment — useful when lead times stretch four to six weeks.
The second is flat-differential pricing: 'Berry copper at LME minus USD 350/MT FOB Rotterdam' fixes the discount in absolute dollars. This works better when the buyer is hedging on their own LME account and wants the differential locked. Both formats are legitimate; the differential format is more common in copper and ferrous trades, while percentage pricing dominates in aluminium and brass.
3. Grade Discount Bands in 2026
Clean, single-source, low-paint, low-iron material trades close to LME. Mixed, painted, oily or low-density material trades at a deeper discount. As an indicative band: 6063 extrusion cut-offs at 90–95% LME; UBC bales at 78–85%; Taint/Tabor at 65–75%; Tread at 60–70%; Millberry copper at 96–99% LME; Berry/Candy at 92–95%; Birch/Cliff at 84–88%; Honey brass at 78–82% of blended copper-zinc LME.
These bands shift with smelter demand, freight markets and LME backwardation/contango. The bands above reflect Q1 2026 Rotterdam loading; buyers should always request a fresh, dated quote and never accept a quotation that does not state the LME reference date.
4. Container and Freight Build-Up
FOB Rotterdam covers material loaded on board the vessel. CIF the destination port adds ocean freight and marine cargo insurance. A 20-foot container takes ~24 MT of dense extrusion or wire scrap but only ~18–20 MT of low-density UBC; freight cost per tonne is therefore higher on light material, and CIF buyers see that cost folded back into the percentage discount.
Bulk vessel shipments (typically 5,000–25,000 MT lots of HMS or shredded ferrous) move on different mechanics — voyage charter freight plus discharge port handling — but the LME-linked logic above is identical for the material valuation itself.
5. Hedging and Long-Term Contracts
Buyers who take recurring monthly volumes can lock in a discount percentage for 6 or 12 months while the underlying LME price remains floating. This is the model behind 'long-term contract' supply and is where Nautica Metal Scrap B.V. typically offers its sharpest discount — sometimes 1–3 percentage points below prevailing spot LME percentages — in exchange for guaranteed offtake and tighter inspection windows.
Smelters with their own LME hedging desks will often instruct the supplier to fix the price on a specific date inside a quotation period (Quotation Period Pricing, or 'QPP'). The contract specifies the QPP — for example 'M+1 monthly average' — and the supplier issues the invoice when that average is known.
6. Why Our Quotations Are Often Below Prevailing Market Rates
Three structural advantages let us discount below the spot percentage that smaller European exporters charge: direct sourcing from collection yards (no broker layer), high-throughput Rotterdam loading (reduced fixed cost per container), and a forward order book that lets us commit material before it hits the spot market. Buyers receive the benefit of those efficiencies in the form of a sharper LME percentage.
Pricing below prevailing market rates is not the same as below-cost dumping. The quotation always reflects a working smelter recovery model, third-party SGS inspection and full export documentation — all of which protect both sides of the trade.