BHP’s Australian nickel shutdowns scupper plans for LME alternative By Reuters

By Pratima Desai and Eric Onstad

LONDON (Reuters) – Plans for two new nickel trading platforms to challenge the London Metal Exchange (LME) have been scrapped due to BHP’s planned shutdown of its Western Australian plants, preventing it from commit to them.

LME nickel has been shunned by both consumers and producers since a market crash in March 2022, but delays to new platforms have allowed the 147-year-old exchange to face potential challenges to its global dominance of the nickel trade. nickel.

Both initiatives were backed by BHP, the world’s biggest listed miner, which said last year that LME nickel did not represent the physical market and that reform was long overdue.

But for them to get off the ground and compete effectively with the LME, the new entrants needed BHP’s nickel volumes. Both are now looking for other sources of supply, but counted on starting with BHP to give its nickel for their rigs.

UK-based Global Commodities Holdings Limited (GCHL) announced plans to launch a physical nickel platform months after the 2022 nickel crash. Prices surged to record highs of over $100,000 a tonne in just hours before trading to be suspended, sending shockwaves through other markets.

And last year, Abaxx Technologies Inc, which owns a new commodity exchange based in Singapore, also announced plans to launch the world’s first contract for nickel sulfate, which is used to make batteries for electric vehicles.

But both GCHL and Canadian-listed Abaxx were hurt by BHP’s decision to suspend the Kwinana nickel sulfate refinery and other Western Australian facilities that supply nickel products, two sources familiar with the matter told Reuters .

Australia-based BHP declined to comment.

“BHP cannot publicly commit to any platform at this time. (It is) not a good picture when you recently announced the shutdown of nickel operations,” one of the sources said.

BHP has not committed to either project but is a shareholder in GCHL and will eventually join the nickel platform, which is led by former LME CEO Martin Abbott, the sources said. GCHL said in March that it would launch its physical metals platform in April.

“It’s fair to say that GCHL’s nickel project has been disrupted by BHP’s decision to stop its Western Australian nickel production,” GCHL chief executive Martin Abbott said.

“BHP has made a significant contribution to the design of the product and, fortunately, the basic standard contract is complete and fully operational,” Abbott added.

“WIDER ECOSYSTEM”

BHP cited an oversupplied nickel market and falling prices for the material mostly used to make stainless steel when it said it would suspend its Western Australian operations from October.

Nickel prices on the LME have fallen more than 80% since their March 2022 peak, partly due to an increase in August 2023 inventories in LME registered warehouses.

BHP noted the GCHL and Abaxx initiatives in a commodity outlook published on its website in February.

“BHP is monitoring all these developments and we are engaging constructively with the wider ecosystem to try to help build a more transparent, efficient and stronger independent pricing mechanism for this essential mineral – in its many traded forms,” ​​he he said.

Abaxx began trading liquefied natural gas (LNG) and carbon futures in June, but delayed the launch of nickel sulfate.

At the time, a company official said the nickel sulfate contract would likely be launched within weeks.

“The nickel industry has recently seen significant changes, which in turn have a wider impact on the market and our contract design,” Abaxx said in response to a question.

“We continuously engage with industry stakeholders to ensure our contract specifications are aligned with market realities.”

A third source said the exit of a major nickel sulfate producer had changed the landscape and that Abaxx was looking for others to provide liquidity.

“You want to make sure that what could be delivered in that is going to be acceptable to buyers,” the source said.

More than 50 percent of the global nickel supply, estimated at about 3.5 million tons this year, will come from Indonesia, where it is mostly produced by Chinese firms. Most of the nickel produced in Indonesia emits large amounts of carbon.

“The predominance of material of Indonesian/Chinese origin means we need to reorient the platform to include nickel from all non-sanctioned origins,” GCHL’s Abbott said.

“Once fully operational, the platform will show the price difference, if any, between nickel of different origins,” he added.