LME to restart Asia nickel trading in March to lift liquidity

LONDON (Reuters) -The London Metal Exchange (LME) will resume nickel trading during Asian hours on March 20, it said on Thursday, providing a boost for liquidity, which plummeted in the wake of a crisis in March last year.

The LME was forced to halt nickel trading and cancel trades in early March after prices doubled to more than $100,000 per tonne in a surge sources blamed on short covering by one of the world's top producers.

As part of a package to stabilise the market upon reopening after a week's closure, the 145-year-old LME cancelled early morning trading during Asian hours, during which volumes are thin.

The exchange delayed the opening of nickel to 8 a.m. London time from 1 a.m. London time because the wild spike higher in March occurred during Asian trading hours.

Nickel is mostly used to make stainless steel, but it is also a key material for the electric vehicle industry, where it is used in the cathode component of batteries.

"The LME ... believes, in light of market participant feedback, that it would be beneficial for the market as a whole for trading on LMEselect to return to a 01.00 London time start," a notice said.

"This is expected to further contribute to liquidity rebuilding in the LME nickel market."

Nickel volumes on the LME, the world's oldest and largest forum for industrial metals trading, dropped 28% last year from 2021.

"Asian and Chinese clients will like it (a restart) because they can continue the arbitrage trade. It will be a positive push for the market, more arbitrage trading and more volumes," said Nong Yan, chief executive of LME member Nanhua Financial UK.

"It's been a vicious circle - the limited hours meant lower liquidity and less interest from traders," she said.

In January, Britain's financial watchdog blocked the restart of nickel trade in Asian hours due to doubts about the LME's ability to run an orderly market in that time zone, three sources with knowledge of the matter said.

The LME did not introduce any new measures along with the restart of Asian trading, but it reminded members of a 15% daily limit for prices, which could trigger a "disruption event" where trading could again be suspended.