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LME Nickel Trading Volumes Plummet Following March Trading Debacle

The London Metal Exchange (LME) experienced a significant decline in the volume of nickel traded, with a drop of over 40% in July. This downward trend has persisted as market participants, including funds, consumers, and producers, continue to steer clear of the exchange. The apprehension stems from the trading suspension that occurred in March, when prices skyrocketed, leaving many concerned about potential price volatility. Additionally, some argue that the nickel traded on the LME no longer accurately represents the global market.

As the world's oldest and largest industrial metals market, the LME faced a major setback on March 8 when it was forced to cancel billions of dollars' worth of trades. Within a few hours, nickel prices surged by more than 50%, reaching a record high of over $100,000 per tonne.

In July, the average daily traded volume of nickel on the LME dropped to 34,962 lots or 209,772 tonnes, marking a nearly 42% decline compared to the same period the previous year. However, in January and February, nickel volumes had experienced positive growth, rising by more than 22% and 23% respectively.

Clearly, traders remain apprehensive about engaging in nickel trading on the exchange.

The decreasing volumes, coupled with a decline in the number of outstanding contracts set to mature or be rolled over at the next settlement date, result in low liquidity, amplifying price fluctuations.

The turbulence experienced in March, combined with doubts regarding the LME contract's alignment with the nickel market, has led many consumers and producers to avoid the exchange. It’s obvious that time alone will not be enough to reinvigorate the LME – they will need to take decisive action.

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