EXCHANGE NEWS - LME August volumes slip during exile to Chelmsford

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Tom Jennemanntom.jennemann@fastmarkets.comSenior North American Correspondent973-204-3383

Winter Park, Florida 07/09/2016 - London Metal Exchange (LME) volumes fell again in August as business was likely negatively impacted by the temporarily relocation of the open-outcry ring to the disaster recovery site in Chelmsford.

A structural fault in the London building that has housed the LME forced the exchange to move all of its functions elsewhere from July 18 to September 5.

LME average daily volumes (ADV) for all futures and options contracts in August was 553,531 lots, off 17 percent year-on-year and down 5.2 percent from July. Total volume for month was 12,173,009 lots, according to exchange data.

Year-to-date volume for the first seven months was 103,837,410 lots, down 9.4 percent, the LME added.

LME futures open interest in August was 2,246,266 lots, down 5.1 percent year-on-year and 2.4 percent below July’s tally.

"Volumes were down significantly in July and August. It could be because we were at the recovery site or it could be because it was summertime,” a floor trader told FastMarkets on Wednesday.

Chelmsford did not have the same communication technology or the convenience of London, so the market did not work quite as efficiently, some participants noted.

"I know it is the summer so you would expect it to be slow but it just feels to me that it is slower, which is down to being [in Chelmsford]," a veteran trader said in August.

September will be a critical month for the LME. The summer is over and operations have returned to their normal home in London.

And even more importantly, starting on September 1, the exchange altered its fee structure. Specifically, it rebalanced its fee rate for short-dated carries – including the ‘Tom’/Next trades executed by members, with a 44 percent reduction to $0.50 per side - which includes trading and clearing.

Nevertheless, LME CEO Garry Jones has noted that the declines in volumes were not just fee-related and were a reflection of a downturn in physical activity and global economics.

“I don’t think it will turn on a sixpence but we hope [fee cut] will contribute [to higher volumes]. It's not a silver bullet, but we're going in the right direction,” Jones told FastMarkets on August 8.

As for individual metals, aluminium ADV for August was 179,456 lots, a drop of 28.8 percent year-on-year. Total aluminium volumes were 3,948,039 lots. Year-to-date aluminium volumes were 37,054,966 lots, down 12 percent.

Copper ADV was 136,606 lots, down 15.3 percent. Total copper volume for the month was 3,005,328 lots. Year-to-date volume was 26,257,521 lots, off 7.3 percent.

Lead ADV was 37,492 lots, off 19.7 percent. Total lead volumes in August were 824,834 lots. Year-to-date lead volumes were 7,324,630 lots, a decline of 18.4 percent.

Nickel ADV was 77,666 lots, down only 0.9 percent. Total nickel volumes were 1,708,648 lots for the month. Year-to-date nickel volumes were 13,760,867 lots, an increase of 0.9 percent.

Tin ADV was 5,015 lots, down 10.2 percent. Total volumes were 110,320 lots for the month. Year-to-date tin volumes were 925,132 lots, a drop of 6.9 percent.

Zinc ADV was 115,366 lots, off 8.4 percent. Total zinc volumes for August were 2,538,053 lots. Year-to-date zinc volumes were 18,132,862 lots, a decline of 9.6 percent.

(Additional reporting by Kathleen Retourne, Martin Hayes and Ewa Manthey)



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