European aluminium consumers are already paying the price. Physical premiums have surged, the CME's duty-paid spot contract jumping from $290 per tonne at the start of December to a current $423.
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LME three-month nickel , the primary pricing reference for the global physical supply chain, hit $101,365 a tonne early on Tuesday, up from just $30,000 on Friday.
The contract was suspended at $80,000 as the exchange stepped in to halt trading at 0815 GMT. All Tuesday's trades up until then will be cancelled until further notice, the LME said.
Reuters :- China's Tsingshan fires nickel rally as it cuts costly exposure-sources
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I think what's happening with the LME and Nickel should concern people. They are basically changing market rules & adjusting trades on the fly to protect one counterparty.
Conspiracy Theory Anyone? ... It just happens that the LME is now owned by the Hong Kong Exchange, which is now a Chinese territory, and maybe not surprisingly the counterparty they are protecting is the largest Nickel producer in China!
Reuters :- Nickel, the devil's metal with a history of bad behaviour
In my opinion, the issue with nickel is that the contract is poorly designed with regards to eligible deliverability criteria. As a physical settlement contract the current deliverability criteria choke off most of the liquidity around rolls and expirations. I wonder if simply allowing for a cash settlement option would alleviate the issue. Either way, until its resolved, you'd have to be a special kind of stupid to trade nickel on the LME right now.
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I have mixed feeling about this one. On one hand, this offers the copper product to a lot more traders. It provides the ability for traders to test the waters in a market they may not consider regardless of approach (discretionary, systematic). It also allows diversification for those with smaller accounts.
On the other hand, I feel these micros are a money grab for the CME, especially given the transaction fees compared to the minis. I think they are targeting speculators rather than hedgers or those taking physical delivery.
My uneasiness aside, though I cannot trade copper, this is an interesting product that I would trade if I could, as I have a couple copper systems that perform well.
~vmodus
Enjoy everything!
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