Base Metals Trading Hits Record Highs as Global Exchanges See Surge in Activity

This resurgence in trading activity wasn't limited to just aluminium but was evident across all six core base metals contracts at the LME, including nickel.

Base metals trading is experiencing a significant revival, highlighted by a record-breaking month at the London Metal Exchange (LME).

In April, more than 17 million contracts were traded, marking an all-time high in outright volume terms, with daily averages second only to those seen in April 2018.

This surge was reminiscent of the spike caused by the U.S. government’s introduction of aluminium import duties, which significantly disrupted global trade patterns.

This resurgence in trading activity wasn’t limited to just aluminium but was evident across all six core base metals contracts at the LME, including nickel.

Nickel trading had previously suffered due to the LME’s suspension and trade cancellations in March 2022, but recent figures show a dramatic recovery, with volumes doubling from the previous year and reaching heights not seen since February 2022.

The boom is not confined to London; it’s a global phenomenon. The U.S. CME Group saw record copper trading volumes in both futures and options.

Meanwhile, the Shanghai Futures Exchange (ShFE) reported a significant rebound in activity in April following a subdued first quarter.

The first four months of 2023 saw LME daily volumes increase by 35%, indicating a growing trend that began in mid-2022.

This contrasts sharply with the years between 2019 and 2022 when industrial metals fell out of favor with investors, partly due to lost confidence following the nickel crisis.

However, a British High Court ruling in November 2023 upheld the LME’s controversial decision to cancel nickel trades, helping restore trader confidence.

In terms of specific metals, trading volumes for lead, zinc, tin, aluminium, and copper all saw double-digit increases in the January-April period, with copper being particularly notable for its steady growth.

Copper has emerged as a standout in the base metals market, with a 25% price increase since February, surpassing the $10,000 per metric ton mark for the first time since April 2022. This rise is fueled by investor bets on a global manufacturing resurgence and increased demand from the energy transition. According to the latest Commitments of Traders report, long positions on copper reached their highest level since January 2018, despite a significant increase in short positions, indicating vigorous speculative activity.

This heightened trading activity extends across all major metals exchanges.

For instance, LME’s copper volumes exceeded four million lots in April, a peak not seen since June 2016.

Similarly, CME’s copper futures broke the four-million-contract barrier for the first time, with options trading nearly quadrupling year-on-year.

In China, the ShFE also enjoyed a significant uptick in copper futures, with volumes more than doubling year-on-year to 6.3 million contracts in April.

This surge reflects a broader recovery in trading across all base metals at the ShFE, contrasting with the declining activity in the steel sector, which remains affected by the country’s property market downturn.

Overall, the base metals sector is witnessing a resurgence of investor interest, driven by broader economic trends and specific market dynamics, signaling a robust recovery and a hopeful outlook for the commodities market.