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Exclusive: London Metal Exchange aims to ban metal sourced with child labour

Reuters  |  LONDON/BEIJING 

By and Tom Daly

LONDON/BEIJING (Reuters) - The Exchange could remove companies from its list of approved suppliers if they fall short of industry standards following an outcry about mined by children in Africa, three sources said.

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

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

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

Carmakers such as have asked suppliers to ensure does not come from child labour and concern some of the in approved warehouses may be tainted has led some consumers to shun its contracts.

While there is no single industry-wide standard for responsible mineral supply chains, the Organisation for Economic Co-operation and Development (OECD) has a five-step framework and the Institute is developing its own standards.

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

Most have now responded though stragglers will be given a new deadline, possibly the end of the third quarter, or risk being named and shamed, the sources said.

They said the process of establishing the principles, the adoption of specific standards that have to be adhered to and time to allow producers to meet the requirements could take up to two years, or possibly longer.

The spotlight in has also fallen in recent years on tin, another traded on the that is used in and can come from conflict zones or in

COMES TO A HEAD

The declined to comment on the survey responses or whether approved brands could be removed from its lists.

"The is committed to facilitating the implementation of recognised responsible sourcing standards for its listed producers and expects to issue further guidance on this topic over the coming months," the exchange said in a statement.

Rights group brought the issue to a head with a 2016 report detailing the use of child labour in artisanal mines in Democratic Republic of and in 2017 it said some major and companies were not doing enough to clean up their

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

Worries about from first emerged last June and prompted some in the industry, including sources on the LME's committee, to call for it to be suspended from the list.

Yantai's inclusion in the approved list at that time created a discount for the price of against prices gathered by Bulletin, a trade publication, sources said.

joined China's Responsible Initiative (RCI) in December, which was formed by the Chamber of Commerce of Metals, Minerals & Chemicals Importers & Exporters and also includes major end users of such as and

Liu Xiaohan, at Yantai Cash, told the company realised the importance of building a responsible supply chain and was taking active measures to address the challenges.

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

IDENTIFY RISKS

One source familiar with the said Yantai's metal, which is one of nine approved brands, could be banned if the company has not shown good progress by the end of the year in applying the principles the exchange plans to announce.

Yantai's Liu said any talk of a ban was irresponsible and not grounded in fact.

The has not approved any specific industry standards on responsible sourcing as yet.

The OECD's framework was developed by both member and non-member countries as well as the Group of Experts for Democratic Republic of

The also said on its website that it has worked with and the to develop Chinese due diligence guidelines.

China's Responsible Initiative is calling on companies in the supply chain to recognise the and Chinese guidelines and align their policies with them.

"The won't set standards, that will be done by bodies like the and the Institute, but they can try to make sure standards on the environment are met and human rights are protected," one trader said.

The Institute is working on what it calls the Industry Risk Assessment Framework.

"We expect to be able to roll it out later this year," said David Weight, of the Institute. "The idea is to identify the risks for members and their customers and provide a framework that gives guidance on how to respond to risks."

The last year published a code of conduct for its members and the on Mining and Metals also has guidelines on responsible sourcing.

(Reporting by and Tom Daly; editing by and David Clarke)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Tue, February 13 2018. 20:41 IST
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