(Bloomberg) -- The London Metal Exchange said that the market for so-called “green nickel” was too small to warrant its own futures contract, a blow to miners hoping to secure a premium for their metal.

Market participants had expressed concern a contract for nickel produced with less carbon intensive methods would not attract enough trading volumes or metal stocks to make it viable, the LME said in a notice on Tuesday. Industry consensus also did not yet exist on what constituted green nickel, it said.

Struggling nickel miners in Australia and elsewhere have been trying to make the case for a green premium for low carbon nickel following a 44% slump in LME prices last year, driven by a huge expansion of Indonesian supply. Smelters in the Southeast Asian nation typically rely on coal to power their plants, giving their product a large carbon footprint.

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The issue is particularly sensitive for the LME as its main nickel contract continues to make a slow recovery following an unprecedented short squeeze in 2022 which forced the exchange to cancel trades. That led many market participants to stop using its futures, causing a significant drop in its liquidity.

The majority of market participants see adding dedicated futures for green or other forms of nickel as a threat to the main contract’s overall liquidity, the LME said on Tuesday. The exchange said it would still keep working with the market on ways to identify what constituted green nickel, starting with a threshold of 20 tons or less of carbon dioxide per ton produced.

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