Stainless MMI: LME Riddled With Challenges, Nickel Prices Rebound


The Stainless Monthly Metals Index (MMI) broke to the downside from May to June, with stainless steel prices falling 10.15%

After falling over 14% throughout May, nickel prices began to rebound during the first half of June. Since prices remain within their short-term range without an established trend, uncertainty and volatility may increase in the coming weeks. 

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LME Loses Benchmark Status for Part of Nickel Market

Just over 15 months after the historic March 2022 nickel squeeze, the LME lost its status as a benchmark for an important portion of the nickel market. According to a recent Bloomberg report, Christel Bories, CEO of Eramet, an index from the Shanghai Metals Market “has become the benchmark” for ferronickel prices. Eramet is known as the world’s second largest producer of ferronickel, a nickel-iron alloy used to make austenitic stainless steels.

Nickel price correlation chart
While highly correlated, over 86% since 2012, LME nickel and Chinese nickel sulfate prices sit at a considerable delta between on another. Source: Insights, Chart & Correlation Analysis Tool

The nickel market has become increasingly bifurcated amid a supply boom of less pure forms of nickel from Indonesia. Meanwhile, the LME price only reflects pure nickel ore, also known as Class I nickel. According to Bories, the nickel pig iron and nickel sulfate markets have also reportedly started to use indexes. NPI and nickel sulfate currently account for at least 60% of global output. Pure nickel accounts for roughly 25%, while ferronickel accounts for 10%. The LME announced intentions to develop a China-based Class II nickel spot market contract. The contact would be for the LME’s sister company, the Qianhai Merchantile Exchange (QME), that contract has yet to launch.

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What Does This Mean for the Stainless Steel Surcharge?

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While the loss of ferronickel benchmark status creates yet another problem for the embattled exchange, the declining use of the LME as a benchmark for Class II nickel forms will not impact domestic stainless steel prices. For one, scrap makes up the vast majority of stainless steel. Outokumpu reports using around 90%, the highest on the market. Despite this, stainless surcharges, which MetalMiner forecasts, are typically calculated by the price of various alloying elements. Western producers currently use the LME nickel price as part of this calculation, which insiders say is unlikely to change anytime soon.   

Nickel Contact Remains Broken

While stainless steel prices won’t see an impact, the state of the LME’s nickel contract already has and it will continue to do so for the foreseeable future. In February 2022, average daily trading volume and open interest sat at around 7,140 and 236,905, respectively. Trading volumes and open interest help measure liquidity and participation within a contract as they reflect the number of daily trades and active contracts. The historic squeeze caused an over 18% drop in average trades during March, while contracts fell over 13% by the end of the month. The drop was even more pronounced between February 2022 and May 2023, as the average daily trading volume dropped by nearly 58% to 3,032. Meanwhile, open participation by the close of May saw an over 34% decline to 155,602.

The exodus of market participants appears to have flatlined throughout 2023. This has helped soften some of the nickel price volatility experienced amid the turbulent market since the squeeze. However, the increased use of other indexes, challenges from competitors like Global Commodity Holdings, and a growing list of LME scandals will likely prevent any meaningful upside with regard to liquidity. Liquidity could decline even further, which would substantially impact nickel prices.

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The LME Heads to Court Over Squeeze

Speaking of the challenges facing the LME, court proceedings began on June 20 to address the lawsuit leveled by hedge fund Elliot Associates and trading firm Jane Street Global Trading. The companies are suing the LME for a combined $472 million over the organization’s handling of the March 2022 nickel squeeze. On March 8 of that year, the LME suspended trading and canceled a number of trades after prices surged to over $100,000 per ton.


The lawsuit alleges that the LME acted unlawfully due to breach of policy, as it disproportionately benefited some market participants in its decision to cancel trades. However, the LME has previously argued its authority to make those decisions for the benefit of the overall market due to the likely default by multiple members on margin calls totaling $19.7 billion. 

Separate from the lawsuit, the LME is also under investigation for its handling of the ordeal. The many problems facing the exchange, including rising presence of Russian material in its warehouses, pose a risk to base metal markets. Instability at the LME could push market participants toward other exchanges, which would challenge its use as global benchmark for base metal prices, including nickel.

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Biggest Nickel and Stainless Steel Price Moves

  • Chinese ferrochrome lump prices saw the only increase of the index. Prices rose 2.81% to $1,295 per metric ton as of June 1.
  • Meanwhile, Chinese ferromolybdenum lump prices saw a 6.05% month-over-month decline to $34,466 per metric ton.
  • Indian primary nickel prices fell 10.41% to $21.85 per kilogram.
  • LME primary three-month nickel prices fell 14.59% to $20,540 per metric ton.
  • Finally, Chinese primary nickel prices dropped by 15.63% to $23,458 per metric ton.

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