LONDON, May 13 (Reuters) - The boom times are back for base metals traders.

Over 17 million contracts traded on the London Metal Exchange (LME) in April, making it an all-time record month in outright volume terms. Expressed in average daily volumes, activity was the second highest on record after April 2018.

That was the month the U.S. government announced import duties on aluminium, a shock to global trade patterns that generated a one-off volume spike on the LME aluminium contract.

This time around the lift in activity has played out across all six of the LME's core base metals contracts.

Even nickel is back in full recovery mode. Volumes dropped precipitously in the aftermath of the LME's suspension of the market and cancellation of trades in March 2022. Activity last month was double that of a year ago and volumes were the highest since February 2022.

This, however, is not just a London phenomenon.

U.S. peer CME Group registered record copper volumes on both futures and options contracts in April.

The Shanghai Futures Exchange (ShFE) saw activity rebound last month after a weak first-quarter performance.

Industrial metals are back on the investment radar and the world's three big metal exchanges are all reaping the benefits.


LME average daily volumes grew by 35% over the first four months of the year, marking an acceleration of a growth trend that started around the middle of last year.

Activity on the 147-year old exchange, which is owned by Hong Kong Exchanges and Clearing (HKEX), fell every year between 2019 and 2022.

Industrial metals were out of favour with investors. The lack of engagement was exacerbated by a loss of confidence in the LME after the nickel crisis of 2022. Average daily volumes fell by a steep 7.6% that year relative to 2021.

The British High Court vindicated the LME's decision to cancel nickel trades in a November 2023 ruling. That and the exchange's fast-tracking of new nickel brands are generating a rebound in activity.

Nickel futures volumes were 1.34 million contracts last month, compared with a monthly average of 1.33 million over the course of 2021. Options volumes of 195,423 contracts were the highest monthly total since May 2014.

It's not just nickel.

Headline lead volumes grew by 52% year-on-year in January-April, zinc by 44%, tin by 42%, aluminium by 34% and copper by 24%.

Copper's relatively low growth rate reflects the fact that activity started picking up earlier in this market than in the rest of the LME pack.

Indeed, copper is currently the star of the base metals markets.


LME three-month copper has risen by 25% since February and is now trading above the $10,000 per metric ton level for the first time since April 2022.

The move has been fuelled by investors betting on the combination of a global manufacturing recovery and an energy transition demand booster.

Funds have lifted long positions on the CME copper contract to 132,622 contracts, according to the latest Commitments of Traders report, the highest level since January 2018.

Short positioning, however, is significantly higher than then, attesting to greater two-way speculative activity in the market.

That's reflected in trading volumes across all three metals exchanges.

LME copper volumes, including options, rose above the four-million lot mark last month for the first time since June 2016.

CME futures activity broke the four-million-contract barrier for the first time ever, while the U.S. exchange's monthly options saw volumes almost quadruple year-on-year to 404,739 contracts in April.

There were also fresh monthly records for the CME's newer micro copper contract and its weekly options suite.

China has also turned up at the copper party.

ShFE saw copper futures activity more than double year-on-year to 6.3 million contracts in April, while options activity set a fresh monthly record of 2.5 million contracts.


Trading activity fell across the ShFE base metal board in the first quarter of this year as China's prolonged property slump cast a long shadow over the industrial metals sector.

However, April brought an abrupt change of trend, with volumes up year-on-year across all six base metal contracts.

Copper was the outperformer, but zinc volumes rose by an impressive 76% year-on-year in April, nickel volumes by 61%, aluminium by 59% and lead by 55%.

By way of comparison, the ShFE's steel rebar contract saw activity contract for the eleventh straight month in April, with volumes down by 24% over the first four months of the year.

The hot-rolled-coil contract has fared better but volumes were only flat with year-ago levels in January-April.

The differing fortunes between ferrous and nonferrous contracts suggests Chinese investors are differentiating between those metals most exposed to the ailing property sector and those leveraged to new energy sectors such as solar panels and electric vehicles.


The rush of money into the base metals sector is not taking place in isolation. Investors have also been piling into gold and to a lesser extent silver.

Commodity exchange traded funds, which tend to be dominated by retail precious metals investors, are currently valued at $392 billion, just shy of the record levels hit during the first days after Russia invaded Ukraine, according to analysts at Citi.

The bank estimates more than $30 billion of fund money has washed into the commodity sector so far this year. Total assets under management jumped by 7% month-on-month and 11% year-on-year to $767 billion in April, it said.

Precious and base metals sectors are currently attracting the lion's share of that speculative enthusiasm for hard assets.

The LME, keen to consign a couple of difficult years to the history books, can only hope the trend continues.

The opinions expressed here are those of the author, a columnist for Reuters.

(Editing by Jan Harvey)