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One of the City of London’s oldest institutions has been forced to launch an investigation into whether cobalt mined by child labour is trading on its exchange, tainting a key link in the supply chain for mobile phones and electric vehicles.

Members of the 140-year-old London Metal Exchange say it allowed one Chinese company to sell untraceable cobalt through the bourse in the last three months, raising concerns the rechargeable battery material may have come from mines in the Democratic Republic of Congo accused of employing children.

Earlier this month, the LME quietly sent a directive to all suppliers asking them to detail how they guarantee “responsible sourcing” of commodities traded on the exchange. The notice, contained in email seen by the Financial Times, requests a response by December 1.

The LME is the world’s most important venue for industrial metals and helps set prices for copper, tin and other metals. If tainted cobalt is found in its network of warehouses it could trigger a backlash from users of the exchange.

Groups such as Amnesty International say children as young as seven are mining cobalt by hand in the DRC, one of the world’s poorest countries. The allegations have put pressure on companies such as Tesla and Apple to ensure cobalt in their products is traceable to reputable mines.

More than half the world’s cobalt comes from the DRC, where up to one-fifth is extracted by so-called artisanal miners, who dig by hand in deep tunnels. Artisanal mines are more likely to employ child labour, according to Amnesty.

Cobalt prices have risen by more than 80 per cent this year as carmakers step up electric vehicle production. Material mined in the DRC is largely sent to China for processing.

The LME notice, sent 12 days ago, said its inquiry was part of a broader push to address responsible sourcing and was “not related to any particular producer or brand”. Two traders said, however, the request came only after they had made complaints to the LME about the traceability of specific cobalt supplies.

“[W]e would expect that any specific concerns will be addressed as part of our existing efforts and we look forward to engaging with the market further on this important topic,” the LME email said.

The two traders said concerns arose this summer when metal produced by Yantai Cash Industrial, a Shandong-based producer, first appeared on the exchange. They said many market participants believe Yantai Cash sources some of its unrefined cobalt from artisanal DRC mines that carry a higher risk of using child labour.

Yantai Cash executives said they have begun an inquiry into the concerns.

“Some of our customers have asked us to do due diligence investigation on the supply chain to see if [the chain] has child labour or human rights problems,” said Mr. Liu, Yantai Cash’s deputy head of international trade. “We have started doing that.”

The LME has broad regulatory control over metal on the exchange, but has no specific rule governing sourcing. Some of the world’s biggest miners including Glencore and China Molybdenum also operate in the DRC using large-scale machinery.

“We have strict guidelines and criteria for brands wishing to list their products on the LME,” the exchange said. “Any evidence of sub-standard practices that fall short of our requirements would be investigated by the LME and action would be taken.”

While LME metal must meet certain quality standards, buyers cannot choose the source of the material, which is delivered from the exchange’s own warehouses.

Concern they might receive Yantai Cash metal has caused cobalt on the LME to price at a discount to other sources recently, traders said.

With additional reporting by David Sheppard in London and Archie Zhang in Beijing

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