LONDON — The London Metal Exchange’s (LME) suspension of its nickel contract in March has led to a sharp drop in metals trading activity. Total LME volumes slumped by 21% over the second quarter relative to the first three months of 2022.
Nickel was unsurprisingly the biggest casualty with the Shanghai Futures Exchange (ShFE) nickel contract also going into deep freeze. But the chill effect has spread through all the LME’s core base metals products in the last three months, suggesting an exit by institutional players unhappy with the exchange’s cancellation of nickel trades, a decision that is now being challenged.
The LME’s nickel woes are interwoven with bigger macro trends. COVID-19 lockdowns depressed Shanghai trading volumes across both base and steel contracts in the first half of the year.
Fears of recession are currently generating a much broader investor exodus from the commodity sector, ironically just as retail players seem to be getting an appetite for industrial metals.
BROKEN NICKEL
The LME’s nickel contract limped back into life after six days of suspension but volumes have been much reduced ever since.
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