Doomsters have predicted the end of the LME before. Still, after 146 years and counting, the LME is still with us and the go-to nickel price point. However, volumes have tanked since the LME nickel debacle in March of 2022. In fact, the problems no longer relate just to nickel, but the entire non-ferrous metals spectrum.
To make matters worse, all the LME’s main contracts recorded drops in volume. Aluminum is down by 9%, lead by 4%, and zinc by 3%. Copper proved the most resilient, with a year-over-year volume decline of under 2%. The article largely credits this to a pick-up in action over the fourth quarter.As the Reuters article indicates, the LME isn’t alone. China’s SHFE has suffered an even worse collapse in volumes. This is largely due to the country being in rolling lockdowns throughout 2022.
For instance, the CME’s monthly copper options contract saw a 41% rise in trading activity. This included market open interest of 82,599 contracts at the end of the year, a record high. Meanwhile, steel contracts such as the HRC hit a record of 260,885 lots, equivalent to over five million tonnes. The steel scrap contract also managed to benefit from increased volumes.Adding to the chaos are the emerging challengers to the LME Nickel contract.
All this uncertainty around nickel price discovery comes at a critical time for a metal with rapidly-evolving uses. An excellent example is nickel’s new role as a battery metal in the form of Nickel Sulphate. What’s more, traditional applications in alloying to form stainless steel, nickel plating, and alloying with copper and zinc continue to expand.Like Cobalt and Lithium, the elemental metal’s price performance does not always precisely correlate with that of its salts.