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Jamie ran on down to the LME, but the devil caught him there,

He took Mr. Dimon’s Nickel bags and vanished in the air,

Set out running but I’ll take my time,

A friend of the devil is a friend of mine”

-adaptation of Grateful Dead’s “Friend of the Devil”

Just one year after the London Metal Exchange (LME) nickel market broke down, the “devil’s metal” found itself back in the headlines. This time around, the LME reported that 54 metric tons, worth about USD 1.3 million, of nickel turned out to be bags of stones.¹ J. P. Morgan was revealed to be the registered owner tied to contracts slated for physical delivery, and the S&P GSCI Nickel registered a 20.54% decline for Q1 2023. Nickel represents more than a third of the S&P GSCI Electric Vehicle Metals Index and the component’s performance has dragged the overall index into bear market territory, with a one-year return of -24.73%.

Commodity-based inflation readings (including food and energy) experienced record drops in the eurozone. That didn’t stop silver and gold from rebounding nicely on the month, as the non-commodity inflation indicators, or core measures, continued to give credence to central banks focused on bringing price increases down to a simmer. The S&P GSCI Silver and S&P GSCI Gold rallied total returns of 15.11% and 7.61%, respectively.

Widening out to the broad commodities market, the world’s leading commodities benchmark, the S&P GSCI, lagged stock and bond indices, falling 1.07%. Meanwhile, the S&P GSCI Energy fell 3.49% for the month, and oil futures continued to show discounts out the forward curve, supporting expectations that supply constraints will abate. Output of nearly half a million barrels of oil, or 5% of global production per day, was cut by a court ruling in favor of the Iraqi government. Iraq successfully argued that Turkey violated prior agreements by importing oil from the Kurdistan Regional Government.

The worst-performing segment of the S&P GSCI was natural gas, dropping 23.22% to its lowest level since January 1994. Following a mild winter and expected seasonal demand declines in spring, natural gas storage levels have come down. U.S. capacity to convert to liquified natural gas (LNG) picked up with the resumption of shipments from the Freeport LNG export plant in February. Four more LNG plants were expected to be built to meet European demand. However, increased borrowing costs and lower gas prices were cited as reasons for halting two of those plants.

Within agriculture, the S&P GSCI Sugar rallied 11.32% in March, hitting a five-year high as India cut exports after rain damage to their sugar crop. The S&P GSCI Sugar has been the “sweetest” or best-performing constituent of the 24 commodities comprising the headline S&P GSCI in 2023, up 20.27% YTD and 27.63% year-over-year.

¹ Home, Andy. “The return of the London Metal Exchange’s nickel curse.” Reuters. March 21, 2023.

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