LME Expects to Resume Asian Hours Nickel Trade

SHANGHAI, Jan 13 (SMM) - The LME had said on Nov. 28 that it hoped to resume trading during Asian hours within two weeks. But Britain's Financial Conduct Authority (FCA) had reportedly told the exchange that it does not yet have adequate supervisory controls for that time period.  The regulator wants the LME to monitor nickel trading and make sure volatility is contained. There's no certainty it can do that when London is asleep.   

The abnormal prices hampered the trades of the commodities using LME prices as settlement prices such as MHP, nickel matte and ferronickel in the second quarter. The market came to a standstill for a while.  Shortly after the crisis in March, the LME also implemented a daily price limit for nickel prices. But due to a systematic error, the trading was suspended again. And LME was forced to halt the nickel trading during Asian hours.

Warrants would be a key issue affecting the resumption of nickel trade during Asian hours. The persistently low LME nickel inventories driven by scarce first-grade nickel supply caused the significant volatility in nickel prices. This issue can be solved if second-grade nickel is also included in deliverable products.

SMM believes that whether the nickel trade will resume during Asian hours will hinge on trade volumes as opposed to the price trends.

Import profits reemerged recently on the back of falling LME nickel prices. SMM survey showed that some NORNICKEL nickel has been cleared and entered China’s domestic spot market. Overseas spot cargoes, after the closing of the import window for two months, have been scarce. But now the supply tightness of overseas products will ease. Domestic pure nickel supply is also increasing. Therefore, nickel prices are unlikely to be overestimated in the foreseeable future amid growing supply.