Don’t look to Shanghai for an answer. The Shanghai Futures Exchange has experienced an even more pronounced collapse in activity, volumes slumping by 70% last year amid rolling time-spread volatility.Global Commodities Holdings thinks it has a solution, a blast from the LME’s own distant past that could have far-reaching consequences for industrial metals trading.GCH operates globalCOAL, a trading platform for thermal and metallurgical coal with 3,000 registered users.
A daily settlement price will be derived from physical orders and trades across the front two months for deliveries to Baltimore, Jebel Ali, Amsterdam/Rotterdam/Antwerp, Singapore, Kaohsiung, Johor, Busan and Shanghai. The minimum transaction will be 20 tonnes, equivalent to a container. The LME’s arcane trading system still bears the imprint of its genesis. The unusual three-month benchmark price was born out of shipping times for Chilean copper and Malaysian tin. The bewildering multi-day rolling prompt system evolved from the vagaries of port arrivals.
The CME has been rapidly building out its industrial metals portfolio, but curiously has never offered a nickel product.With trading activity bombed out and legal action by disaffected funds looming large, it’s hard to see how the exchange can recover any time soon its credibility as a global nickel pricing venue.
The fact that Tsingshan’s massive nickel operations don’t produce the sort of metal deliverable against the LME contract simply compounded the blow-up.