- Shanghai Metals Market becomes benchmark for ferronickel
- Loss of benchmark status could impact LME's reputation
- China's influence on metals market could extend to gold market
In a major shake-up for the global metals market, the London Metal Exchange (LME) has lost its benchmark status for a part of the nickel market. According to a report by Bloomberg News, the Shanghai Metals Market has become the new benchmark for pricing ferronickel, a development that could have far-reaching implications for the LME and the global gold producers who are also on the same market.
The move comes as China continues to expand its influence in the global metals market, with the Shanghai Metals Market emerging as a major player in recent years. The index produced by the Shanghai Metals Market has now become the benchmark for pricing ferronickel, a key component used in the production of stainless steel.
For the LME, this development is a major blow, as it has long been considered the leading platform for global metal trading. The loss of benchmark status in the nickel market could have a significant impact on the exchange's reputation and could lead to a decline in trading volumes and influence on other metals such as gold, the top traded commodity.
The implications of this development go beyond the LME and the nickel market. The shift could influence future changes in the entire commodities market, where other metals highly traded in other markets outside of US and Europe could dictate trading status. China is a major player in the gold market, with the Shanghai Gold Exchange emerging as a key platform for gold trading in recent years. With China's growing influence in the metals market, it is likely that the Shanghai Gold Exchange will also become an increasingly important player in the global gold market, in the nearby future.
Despite the growing influence of China, it remains to be seen how this will play out in the long term. The Shanghai Metals Market may have become the benchmark for pricing ferronickel, but the LME remains the leading platform for trading other metals such as copper and aluminium. Moreover, the influence of China in the global metals market is still relatively new and it remains to be seen how it will impact other markets such as gold.
Overall, the loss of benchmark status in the nickel market is a significant development for the LME and the global metals market. As China continues to expand its influence, it is likely that other markets will also be affected. The rise of the Shanghai Metals Market and the Shanghai Gold Exchange is a trend that cannot be ignored and could have far-reaching implications for the global metals market in the years to come. Zimbabwe lost its LME status in 2008 after recording on 3 tonnes of gold. As production recovered during dollarisation, the country began to trade via South Africa’s Rand Refinery which would trade onward on the LME. In recent months the country found itself embroiled in illicit gold trade through a documentary by Al Jazeera. Zimbabwe has shifted from trading via South Africa to Dubai. However, Dubai has become a hub for illicit trade of gold exposing Zimbabwe’s financial sector.
