LME’s Plan to Revive Nickel Gets Boost With Chinese Listing Bid

Mark Burton, Bloomberg News

Nickel balls ready for shipment at the Vale Copper Cliff mine in Sudbury, Ontario, Canada, on Wednesday, June 1, 2022. Nickel is the key ingredient in the stainless steel used in everyday appliances, but it's also critical for the transition away from fossil fuels, since it's used in the batteries automakers need to electrify the world’s car fleet. , Bloomberg

(Bloomberg) -- China’s Zhejiang Huayou Cobalt Co. applied to list its nickel on the London Metal Exchange, becoming the first producer to use a fast-track registration process designed to help rebuild liquidity in the exchange’s contract following last year’s short squeeze.

Like top producer Tsingshan Holding Group Co., Huayou was one of the key players in last year’s crisis, as a holder of short positions that became deeply unprofitable as prices spiked. Tsingshan and Huayou are both increasing production of refined nickel — partly in response to a tighter market for refined metal than other products, and partly as a step to limit the severity of any future squeezes.

Chen Hongliang, president of Huayou, traveled to London earlier this year to meet with LME CEO Matthew Chamberlain to discuss a plan to list his nickel, and there are expectations that Tsingshan could follow suit, Bloomberg reported at the time.

For the LME, adding new brands could help to address a growing disconnect between constrained availability of refined metal in its warehouse network and ample supply of nickel-bearing raw materials and chemicals in the broader physical market. With prices for so-called class one refined nickel and lower grade forms diverging sharply, there have been warnings that the LME is losing its status as the world’s benchmark pricing venue.

Normally, it can take a year or more to list new brands on the exchange, but the LME said in March it would offer a fast-track route as part of a broader set of reforms to rebuild liquidity and confidence in the nickel contract. Tsingshan and another producer, CNGR Advanced Material Co., are also building new class-one plants in Indonesia.

“Given the expected growth in Nickel Class 1 production from new sources, the LME’s fast-track approach and fee waiver for new LME Nickel brands aims to encourage more stock and liquidity to the contract, without relaxing our metallurgical or responsible sourcing requirements,” the LME said in a statement. “We expect to see more fast-track applications come through in the coming months.”