Two commodities brokers say data the London Metal Exchange is using to support its proposal to shut its trading floor for good exaggerates the increase in the use of electronic platforms during coronavirus lockdowns. Sucden Financial and StoneX Financial, which oppose the end of so-called ring trading at the 144-year-old exchange, say data used by the LME in a presentation does not take into account electronic trading before floor trading was suspended in March. The row highlights a long-running battle between modernists and traditionalists over the future of the LME ring, the last open-outcry trading floor left in Europe after other exchanges for everything from oil to stocks to cocoa all moved online.
(Bloomberg) -- Tin traders are facing one of the biggest squeezes in the history of metals markets as Covid-19 drives a spike in demand and supply falters.That turmoil is capturing the attention of major investors who tend to overlook the critical but highly illiquid metal. Demand for tin, used in soldering, has surged amid booming sales of electronics in the work-from-home era. Coupled with disruptions to mine output and shipping routes, that’s left major European and U.S. consumers scrambling for metal as warehouses run dry.Futures prices have rocketed nearly 25% on the London Metal Exchange to trade at nine-year highs above $25,000 a ton. Tin is the latest commodity to be roiled by the pandemic, following oil’s collapse into negative territory, the supply paralysis in top gold-trading centers and the cocoa market price war.“Tin is relatively small compared to other markets, and people need to be aware of its potential to come and surprise you,” Charles Swindon, managing director of specialist minor metals trading house RJH Trading Ltd., said by phone. “We’ve had a lot of enquiries from non-traditional sources looking to buy from us, but there’s just very little metal around.”Price rises for spot buyers of tin have been even sharper than the rally in futures, with contracts for short-term supply trading at unprecedented premiums to longer-dated prices. That condition, known as a backwardation, is a hallmark feature of a supply squeeze, and veteran traders say it’s of a scale that has few precedents in the 144-year history of the LME.While the move has been driven by tightness in the physical market, some dealers have questioned whether the closure of the LME’s open-outcry trading floor and a switch to electronic pricing has exacerbated the volatility.As a percentage of futures prices, the tin backwardation has been larger than one seen in the nickel market in the mid-2000s, which sent prices vaulting to all-time highs. That prompted the LME to take special steps to compel futures buyers to lend their positions back to the market to ease the strain on supply. The bourse has stepped up monitoring of the tin market during this year’s squeeze, but said it’s found no evidence that prices have moved out of line with dynamics playing out in the physical market.While tin is by far the best performing base metal on the LME so far this year, copper also hit eight-year highs above $8,600 a ton. Tin climbed as much as 3.7% to $25,470 a ton on Thursday, before trading at $25,280 as of 12:15 p.m. London time. Copper gained as much as 2.9% to $8,630 a ton.With demand for electronics still booming and miners warning of further production shortfalls, a key question for the market is where fresh tin will come from to ease the strain on the LME.On-warrant stockpiles hit a record low earlier this month, and in late January, as much as 90% of the inventory was held by one party, exacerbating the strain on spot buyers. That position has since fallen to 40% to 49% of the total, but even if it’s trimmed further, traders say fresh inflows will be needed.“It’s difficult to predict how this will be resolved, but if prices move much higher than this then we could see some metal coming out of China,” RJH’s Swindon said. “It will take a while to resolve, and we’re going to need to wait for some new production to arrive.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
SINGAPORE (Reuters) -Global commodity markets ended 2020 on a strong note, with recovering demand and widespread stimulus packages buoying prices after a roller coaster ride caused by the global coronavirus pandemic. Rollouts of vaccines to combat the virus and trillions of dollars' in fiscal support are expected to boost investment and spending in 2021, spurring demand for raw materials from oil to copper. "It's been a tumultuous year for the commodity market, as the oil meltdown in March changed how we measure and gauge risk in the entire commodity sphere," Stephen Innes, chief global market strategist at brokerage Axi, told Reuters.