LME cancels nickel trades after prices cross $100,000

Metal is crucial for making stainless steel, electric vehicle batteries

LONDON:

The London Metal Exchange (LME) was forced to halt trading in nickel and said it would cancel trades as prices doubled to more than $100,000 per tons on Tuesday, a surge sources blamed on short covering by one of the world’s top producers.

The trading shutdown after Western sanctions threatened supply from major producer Russia is the biggest crisis to hit the 145-year-old exchange in decades. In the 1990s, a rogue Sumitomo trader tried to corner the copper market and tin trading was stopped for five years in the 1980s.

The LME move came amid market panic caused by Russia’s invasion of Ukraine, with buyers scrambling for the metal crucial for making stainless steel and electric vehicle batteries. “The current events are unprecedented,” the LME said in a notice to members. “The suspension of the nickel market has created a number of issues for market participants which need to be addressed.”

Some position holders have been struggling to pay margin calls, traders said.

China’s Tsingshan Holding Group, one of the world’s top nickel and stainless steel producers, had been building a short position in nickel since last year, betting prices would fall, three sources familiar with the matter said.

Prices rocketed as Tsingshan bought large amounts of nickel to reduce those short bets and its exposure to costly margin calls, they said.

Tsingshan and the LME declined to comment.

The LME raised margin requirements for nickel contracts by 12.5% to $2,250 a tonne and suspended trading of nickel on all venues for at least the rest of the day.

“For the LME to stop trading for an entire day, that doesn’t help its long-term relevance,” said BMO Capital Markets Managing Director of commodities research Colin Hamilton.

Published in The Express Tribune, March 9^th, 2022.

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