Nearly a year after nickel trading volumes on the London Metal Exchange crashed, the exchange has expanded its membership to come up with more ways to improve the nickel contract. The LME suspended its nickel contract for more than a week in early March 2022 shortly after a rush among investors to cover short positions caused nickel prices to surge by more than 50% in hours to trade at a record $100,000-plus per ton during Asian trading hours.
Nickel plays a crucial role in the development of stainless steel and EV batteries. The suspension of nickel trade had wide-reaching repercussions, and the Britain Financial Conduct Authority is still conducting an investigation into the exchange’s decision to halt nickel trading; the agency hasn’t revealed when it expects to complete the investigation.
The exchange recently decided to add four other members to its nickel committee as part of internal efforts to figure out how the exchange can improve its nickel contract. With nickel prices dropping by 28% in 2022 and many investors avoiding the nickel market since last year’s trading debacle, the exchange’s nickel contract is still broken.
The nickel contract is characterized by turbulence and declining liquidity and volumes. Sliding liquidity coupled with low nickel stocks has resulted in increased nickel prices on the London Metal Exchange and has forced industrial users who are currently dealing with rising inflation to shoulder even higher costs.
The LME lost consumers, producers, traders and investors in the aftermath of the trading chaos of March 2022.
The new members of the exchange’s nickel committee are meant to broaden representation in discussions on potential future modifications to the nickel contract, the LME stated. The exchange noted that its primary focus was to partner with industry participants and ensure that “nickel pricing and trading” evolves with industry needs, especially as the exchange looks to reopen trading on its nickel contract and accumulate liquidity.
Sources say that the Britain Financial Conduct Authority is preventing the reopening of nickel trade in Asian hours because it is unsure of the exchange’s ability to operate a well-organized market in the Asian timezone. The suspension of trade during these hours has kept trading volumes under pressure and will hinder attempts by the exchange to rebuild the market confidence it lost after halting trade.
The commission is currently considering the potential of a pig iron contract, particularly from Indonesia, a country that is expected to comprise close to half of worldwide nickel supplies in 2023.
It remains to be seen how these changes at the LME will be received by industry players such as Canada Nickel Company Inc. (TSX.V: CNC) (OTCQX: CNIKF).
NOTE TO INVESTORS: The latest news and updates relating to Canada Nickel Company Inc. (TSX.V: CNC) (OTCQX: CNIKF) are available in the company’s newsroom at http://ibn.fm/CNIKF
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