Class 1 Nickel Trading Volumes on Metalshub

In March 2024, the topic of ‘Green’ nickel made headlines when the London Metal Exchange was urged to separate its nickel contract into a ‘clean’ and a ‘dirty’ one. This comes with the rapid growth of nickel supply from Indonesia. Since 2019, Indonesia has ramped up its nickel mining and processing operations, causing a drop in nickel prices.

Nickel is a strategic raw material for the green energy transition, vital for electric car batteries, as well as for stainless steel production. This means sourcing metals for a green economy must also adhere to the decarbonisation goal across the entire supply chain. However, the low cost of nickel from Indonesia is associated with lower sustainability standards and high carbon emissions due to the use of coal-fired power.

Metalshub, partner of the LME, already offers nickel sellers the opportunity to upload product carbon footprint (PCF) data together with their offers. This brings carbon emissions to the ‘point of purchase’ where the buying decision is made and it can help nickel buyers to reach their ESG goals. Last week, the LME published a notice to communicate to the industry their stance on the topic of discovering a green premium for nickel products with a low carbon footprint and superior ESG characteristics.

A new ‘green’ nickel futures contract would undermine the LME’s efforts to increase liquidity and to grow the amount of physically deliverable nickel brands. Moreover, market participants have expressed concern as to how to define ‘green’ nickel.

“Separating ‘green’ and ‘dirty’ nickel would go against recent demands to rebuild liquidity on the LME following the nickel crisis,” – highlighted Dr. Sebastian Kreft, Co-Founder of Metalshub, in an interview with the Financial Times on the need to introduce green premium for nickel.

Metalshub, a leading software provider for the metals and mining industry, has the functionality to assess a ‘green’ premium already today. Class 1 Nickel can be quoted on the Metalshub platform and buyers can assess the PCF and ESG credentials (e.g. Nickel Mark, IRMA, TSM) when reviewing the offers.

Based on its market engagement, the LME has determined a threshold for a low-carbon nickel category at less than 20 tonnes of CO2 equivalent across Scopes 1-3. Currently, the PCF of various nickel products ranges from 6 tonnes to more than 100 tonnes of CO2 equivalent per tonne on the LME.

Volume traded on Metalshub continues to grow with more than $220m of Class 1 Nickel transacted in 2023. Metalshub already uses transactions to calculate a weekly European Duty Paid Nickel Briquette Premium Index. As of March 1, this premium to the LME Nickel cash price was $245 per metric tonne. Market participants may also use Metalshub to buy and sell nickel sulphate, ferronickel and other types of Class 2 Nickel.

Since March 31, 2024, Metalshub has started monthly reporting on the volume of Class 1 Nickel traded with a registered carbon footprint lower than 20 tonnes of CO2 equivalent per tonne of material. Once a sufficient number of regular transactions is reached, Metalshub will begin publishing a Nickel Class 1 Premium Index (European Duty Paid). This index could, in time, be extended to become a ‘green’ nickel premium index by considering additional sustainability characteristics. Metalshub invites market participants and wider society to contribute to the methodology of providing this index.