LME nickel stocks dropped to around 160,000 tonnes on June 3-4 this year, compared with 446,676 tonnes in January 2016, when the LME warehouse reform to end delivery queues was implemented.

“The warehouse reform went live in 2016 and started to take away the incentives to put metal on warrant,” Xodo said at the International Nickel Conference in Amsterdam.

“We have consulted with the market to see if we had gone too far,” he added, noting that the warehouse proposals that should be announced mid-summer could change the situation and revive stock levels.

The LME launched a consultation on a series of warehouse changes that could relax delivery rules, including queue-based rent caps. This consultation closed on May 31 this year.

The decline in stocks on the LME and on the Shanghai Futures Exchange has been “the hot topic of the year,” Xodo said. Recent drawdowns of nickel briquette stocks were mostly in Asia, he said, and were probably due to a move to off-warrant storage and increased demand from the battery sector.

The LME was also re-engaging with local authorities in China to open warehouses in the country, which consumes 50% of primary nickel demand, Xodo said.

Xodo also repeated that the LME had no immediate plan to launch a nickel sulfate contract because its existing nickel contract was “a good enough proxy” and thus a good hedging tool for the battery industry.

“We are definitely committed to the electric vehicle [sector],” he added.

He also said that the LME is about to announce plans to develop a lithium futures contract with a chosen Price Reporting Agency.