LONDON, July 7 (Reuters) - The London Metal Exchange

(LME) has recorded its highest quarterly volumes since 2014

thanks to the market turmoil that followed U.S. President Donald

Trump's "Liberation Day" tariffs.

The LME Index basket of base metals plunged 11%

after the blanket tariffs were announced on April 2 as metal

markets took fright at the prospect of a full-blown trade war.

The wholesale unwind of positions and subsequent

re-engagement as prices staged a partial recovery resulted in

record daily volumes on April 7 and all-time high monthly

trading action.

Chaos tends to be good business for the 148-year old London

market, which has been owned by Hong Kong Exchanges and Clearing ( HKXCF )

since 2012. Activity last spiked in April 2024, when

the United States and UK announced sanctions on Russian metal.

A more nuanced tariff impact on the CME exchange in

the United States suggests the heightened trading activity has

been driven by the physical supply chain rather than funds.

BACK FROM THE BRINK

Trump's tariffs' blizzard has accelerated the LME's recovery

from the 2022 nickel crisis, when it risked what then head of

LME Clear Adrian Farnham described as "a death spiral".

It took almost a year for volumes to recover after the

exchange's decision to suspend its nickel contract and cancel

trades, a call that was ultimately vindicated in the London High

Court.

Nickel volumes returned to pre-crisis levels last year and

average daily volumes surged another 25% in the first half of

this year despite the price spending most of the time

treading heavy water around four-year lows.

It helps that there is a lot of nickel to be financed. LME

stocks have risen from 34,000 metric tons in the middle of 2023

to over 200,000 with another 71,000 tons sitting off warrant in

LME warehouses.

Low prices and an oversupplied market have also combined to

revive the LME's dormant cobalt contract.

First-half volumes of 6,089 lots were the highest since 2019

and there are currently over 1,000 tons of the battery metal in

LME warehouses, most of it off warrant.

The LME, however, is still playing catch-up with its U.S.

counterpart in the battery metals space. CME's first-half cobalt

volumes jumped by 86% year-on-year and those of lithium

hydroxide by 76%.

WHO'S AFRAID OF DOCTOR COPPER?

The copper market has been particularly tumultuous ever

since the Trump administration announced an investigation into

U.S. imports back in February.

The focus has been on the arbitrage between the CME's U.S.

contract and the international price traded on the LME.

However, that's not been reflected in trading volumes on the

CME futures contract which fell by 40% year-on-year in the first

half of 2025.

It's been a highly volatile trade and one dominated by

physical traders moving metal to the United States to beat the

possible imposition of import tariffs.

The investment community which normally populates the CME

copper contract has evidently been scared off.

Money manager positioning is historically light with

outright long positions flat-lining since early April and

outright short positions falling to three-year lows.

Chinese investors have become equally risk-off with copper

activity on the Shanghai Futures Exchange falling sharply in May

and June. Copper trading activity shrank by 14% year-on-year

over the first half of the year.

PHYSICAL ALUMINIUM BOOM

CME's physical aluminium premium contracts, by contrast, saw

activity mushroom after Trump lifted U.S. import duties to 25%

in March and then doubled them to 50% in June.

Since the CME's futures contract mirrors the LME's

international product, the arbitrage has been traded in the U.S.

Midwest premium, which has unsurprisingly rocketed to

record highs.

So too have volumes, which surged by 69% year-on-year to

over 1.7 million tons in January-June.

The other leg of the physical arbitrage is evidently the

CME's European duty-paid contract. Volumes more than

doubled to 48,142 contracts in the first half of 2025, almost

matching last year's full 12-month tally.

These contracts are by their nature aimed at meeting the

needs of the physical supply chain and it's clear that

industrial hedgers have been actively using them to mitigate

risk as global flows of metal readjust to U.S. tariffs.

TINY TIN HAS NEW FRIENDS

Tin has historically been the smallest and least liquid of

the LME's core base metals contracts, but has been steadily

attracting more interest over the last couple of years.

LME volumes increased by 16% in both 2023 and 2024 and they

were up another 17% in the first half of this year.

A total 902,965 lots traded in January-June, equivalent to

four and a half million tons. It's the highest level of activity

in the first half of any year since 2014.

The LME market was carrying high stocks of over 12,000 tons

back then. Current inventory is around a third of that, split

between on and off-warrant stocks.

Fund participation, though, has been rising with investors

holding record-sized long positions on the LME contract in

March.

They got rewarded with an April price meltdown. But tin's

combination of bullish electronics demand story and a

structurally challenged supply chain has put it firmly on the

investment radar.

The opinions expressed here are those of the author, a

columnist for Reuters.