The beat on this exchange is heavy metal

Michael Brown likes to call himself ``a poacher-turned-gamekeeper.'' Until March he was chairman of a firm trading on the London Metal Exchange (LME), then became the exchange's chief executive.

To the Malaysians, however, Mr. Brown seemed something of a poacher in late June. That's because of the way the exchange handled a record surge in the price of tin. The exchange set a 90 limit ($124) on the premium charged for tin for immediate (spot) delivery, which contrasts with prices for more-distant delivery (futures). That limit still holds.

The Malaysians, as the world's largest miners of tin, stood to benefit from the rapid price increase. The International Tin Council, a price-stabilization organization, has been having a tough time keeping up the tin prices. It would have enjoyed making good money by unloading on LME traders who'd sold tin short -- agreeing to deliver the metal without actually owning it -- some of its hundreds of millions of dollars' worth of tin it had accumulated in a buffer stock. By July prices had fallen well b ack from their peak.

Malaysian officials were angry. If the Tin Council had made some money on its buffer stock, it would be in a better position to continue to support prices. The officials began talking once more about setting up their own tin futures market in Kuala Lumpur.

This is an example of the importance of the London Metal Exchange in world economics.

``It is very significant to the metals industry,'' Brown says. ``It is a market used throughout the world.''

If copper prices fell badly on this market, the governments of Chile, Zaire, Zambia, and Peru could tremble. A sizable chunk of their revenues comes from taxing copper exports.

Conversely, should the prices of aluminum rise, the governments of such places as Guyana, Jamaica, and Australia would give three cheers.

Since the mining and use of metals is so significant economically, the excited voices of the buyers and sellers here during the last few seconds of a trading session can have an echo in cabinet rooms of governments and board rooms of companies around the world. It is the last prices offered as a bell rings the end of trading at sessions around noon which become the official prices of the day.

The London Metal Exchange trades in copper, tin, lead, zinc, nickel, aluminum, and silver. It is the biggest market in the world for tin and aluminum, but it is a lesser factor in silver.

The Commodity Exchange (Comex) in New York claims to dominate the silver market and to be ``on a par'' with the London market in copper. The LME says 70 percent of all copper mined is traded at official prices set on the exchange in London. The LME basically has a world monopoly on trading in lead, zinc, and nickel.

Trading is done in a ``ring'' in five-minute bursts for each of the metals successively at both morning and afternoon sessions.

Although it of course trades in futures, the London Metal Exchange regards itself as the key ``physical'' market for the metals industry. Companies representing producers, middlemen, and fabricators from Britain, continental Europe, North America, the Far East, and Australia are all present in the trading ring. Deals and contracts are settled directly between members.

This system tends to discourage speculators, who prefer the convenience of a clearinghouse operation.

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