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LME volumes still subdued a year after nickel crisis

A year on from the nickel crisis the London Metal Exchange (LME) is still struggling to regain trading momentum.

Volumes dropped sharply after the controversial decision to suspend nickel trading and cancel trades. They have stabilized over recent months but at a lower level than before the market meltdown in March 2022.

The LME is hoping that the resumption of nickel trading in Asian hours will help revitalize its floundering contract and is pressing on with a broader reform package to restore confidence in the 146-year-old industrial metals market.

The drop in activity has not been helped by a broader lack of investor enthusiasm for base metals in the current macroeconomic environment.

The Shanghai Futures Exchange (SHFE) also saw activity fall across most of its base metals suite in the first quarter, dampening the arbitrage opportunities with London.

In this subdued metals trading landscape there are currently two unlikely star performers: London lead and Shanghai tin.

Lost Momentum

Average daily volumes on the LME, which is owned by Hong Kong Exchanges and Clearing, were down by 15% year-on-year in March and by 14% over the first three months of the year.

These comparisons are with the last months of trading before the nickel blow-up and the ensuing flight of many investment players from the market.

The headlines will look a lot kinder to the LME over the coming months since the baseline will be the lower trading activity environment that followed the six-day suspension of nickel trading.

However, average daily volumes in the year since have been running consistently around 13% lower than in the 12 months up to March 2022.

No surprise that nickel itself is still the under-performer of the LME’s core base metals portfolio.

Outright futures and options volumes were 53% lower in the first quarter than the same period last year, albeit with a slight uptick in March itself, which may reflect the restart at the end of the month of Asian-hours trading.

But LME zinc and aluminum also registered sharp volume declines of 19% and 17% respectively in the January-March quarter. Copper activity rose by 10% but was flat year-on-year in March itself.

• [Editor:邢亚敏]