14 November 2022 – Nickel jumped more than 15% to over $31,000 per tonne shortly after the start of trading on the LME. London Metal Exchange decides against ethical standards. And according to a GEM report, the liquefied natural gas industry is building up massive overcapacity, which is likely to depress energy prices.
New rally: nickel jumps up more than 15%
Having already made significant gains last week, nickel first fell by 3.1% shortly after the start of trading on Monday, only to jump up dramatically shortly afterwards. In the process, it hit the 15% price barrier, which in this case was more than $31,000. Trading has since calmed down somewhat, but the price is still 7.5% higher, and seems to have continued upward pressure.
Reminds of $100,000 nickel rally from March 2022
The limit on price changes in nickel and other commodities had been introduced by the LME after nickel jumped to almost $100,000 a tonne in a failed speculative trade by Tsingshan Group.
New investments, G20, cryptos?
The reasons for the nickel jump are still speculative. However, with a digital appearance by Elon Musk at an Indonesian G20 event, investment announcements of several billion USD in the expansion of battery production in Indonesia, could also represent a renewed speculation attempt.
London Metal Exchange without ethical standards
The London Metal Exchange announced on Friday its decision regarding a ban of Russian commodities from the trading venue. The LME made it clear that ethical standards are not decisive for the commodity exchange, but only economic considerations. And the LME will therefore continue to allow trading in Russian commodities.
Broad majority in favour of ethical standards
Despite a broad majority within the LME discussion in favour of ethical and environmental considerations and a ban on Russian commodities, the LME stated that it had a higher responsibility towards the market.
LME again decides against ethical standards
In the past, the LME had already decided not to ban commodities whose ethical standards ran counter to its own statements (e.g. human rights violations) from the marketplace, despite an extensive ethics statement.
So does this really come as a surprise? No. Because the LME has already decided several times in favour of its turnover and against ethical standards. And its economic success is largely dependent on these trades.
Massive overcapacity built up in liquefied natural gas?
According to a report by Global Energy Monitor from October 2022, the massive investment in liquefied natural gas processing and LNG terminals in the wake of the energy crisis has led to a potentially dangerous expansion in this sector.
Although this should significantly reduce energy prices in the short term, the expansion of global export and import capacity massively increases risks to the climate. And it postpones important investments in an industry that already has an expiry date.
The full GEM report “Gas Bubble 2022” from Robert Rozansky and Baird Langenbrunner can be found here.
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