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BHP's suspension of operations disrupts new nickel

platforms

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GCHL and Abaxx seek alternative nickel supply sources

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Nickel prices drop more than 80% since March 2022 peak

By Pratima Desai and Eric Onstad

LONDON, Sept 18 (Reuters) - Plans for two new nickel

trading platforms to challenge the London Metal Exchange (LME)

have been blown off course by BHP's planned suspension

of its plants in Western Australia, which has prevented it from

committing to them.

LME nickel was shunned by both consumers and producers after

a March 2022 market meltdown, but the delays to the new

platforms have enabled the 147-year-old exchange to fend off the

potential challenges to its global nickel trading dominance.

Both initiatives were backed by BHP, the world's largest

listed miner, which said last year that LME nickel did not

represent the physical market and that reform was long overdue.

But for them to get off the ground and compete effectively

with the LME, the new entrants needed BHP's nickel volumes. Both

are now looking for other sources of supply, but had counted on

starting off with BHP committing its nickel to their platforms.

UK-based Global Commodities Holdings Limited (GCHL)

announced plans to launch a physical nickel platform months

after the 2022 nickel debacle. Prices surged to records above

$100,000 a metric ton in just a few hours before trading was

suspended, sending shockwaves across other markets.

And last year, Abaxx Technologies Inc, which owns

a new Singapore-based commodities exchange, also announced plans

to launch the world's first contract for nickel sulphate, which

is used to manufacture electric vehicle batteries.

But both GCHL and Canada-listed Abaxx were wrong-footed by

BHP's decision to suspend the Kwinana nickel sulphate refinery

and other facilities in Western Australia supplying nickel

products, two sources with knowledge of the matter told Reuters.

Australia-based BHP declined to comment.

"BHP can't publicly commit to either platform at the moment.

(It's) not a good look when you've recently announced the

shuttering of nickel operations," one of the sources said.

BHP has not committed to either project but is a shareholder

in GCHL and will eventually join the nickel platform which is

headed by ex-LME CEO Martin Abbott, the sources said. GCHL said

in March it would launch its physical metals platform in April.

"It is fair to say that GCHL's nickel project has been

disrupted by the BHP decision to shutter its Western Australian

nickel production," said GCHL chief executive Martin Abbott.

"BHP was an important contributor to the product design, and

fortunately the underlying standard contract is completed and

fully usable," Abbott added.

'BROADER ECOSYSTEM'

BHP cited an oversupplied nickel market and plunging prices

of the material mostly used to make stainless steel when it said

it will suspend its Western Australian operations from October.

Nickel prices on the LME have dropped more than 80%

since their March 2022 peak, partly due to rising stocks

since August 2023 in LME registered warehouses.

BHP noted the GCHL and Abaxx initiatives in a commodities

outlook published on its website in February.

"BHP is monitoring all these developments, and we are

engaging constructively with the broader ecosystem to try to

help build a more transparent, efficient and robustly

independent pricing mechanism for this critical mineral - in its

many traded forms," it said.

Abaxx started trading liquefied natural gas (LNG) and carbon

futures in June, but delayed the launch of nickel sulphate.

At the time, a company official said the nickel sulphate

contract would likely be launched in a matter of weeks.

"The nickel industry has experienced significant shifts

recently, which in turn has broader impact on the market and our

contract design," Abaxx said in response to a query.

"We are continuously engaging with industry stakeholders to

ensure that our contract specifications are aligned with market

realities."

A third source said having a major nickel sulphate producer

leave the market has changed the landscape and that Abaxx was

looking for others to provide liquidity.

"You want to make sure that what could be delivered into

that will be acceptable to buyers," the source said.

More than 50% of global nickel supply, estimated at around

3.5 million tons this year, will come from Indonesia where it is

mostly produced by Chinese firms. Most nickel produced in

Indonesia emits large amounts of carbon.

"The predominance of Indonesian/China origin material means

we have to re-orient the platform to include nickel from all

non-sanctioned origins," GCHL's Abbott said.

"Once fully operational the platform will show the

difference in pricing, if any, between nickel from different

origins," he added.