LME forced to halt nickel trading, cancel deals, after prices top $100,000

  • The biggest LME crisis in decades
  • Says he’s considering closing for several days
  • Big long positions and big short positions collided -broker
  • China’s Tsingshan Holding Group kept short: sources
  • Shanghai raises nickel trading fees, warns investors

LONDON, March 8 (Reuters) – The London Metal Exchange (LME) was forced to halt nickel trading and cancel trading after prices doubled on Tuesday to more than $100,000 per tonne in an increase that sources attribute to short coverage of one of the world’s top producers. .

The LME’s shock move came as Western sanctions threatened supply from top producer Russia and marked the biggest crisis to hit the 145-year-old stock in decades.

In the 1990s, a rogue trader from Sumitomo tried to corner the copper market, and tin trading stopped for five years in the 1980s.

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“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 that need to be addressed.”

Amid market panic sparked by Russia’s invasion of Ukraine, buyers are scrambling for the metal crucial to making stainless steel batteries and electric vehicles.

Traders said some position holders have also had trouble paying margin calls.

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

Prices soared as Tsingshan bought large amounts of nickel to cut those short bets and its exposure to expensive 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 nickel trading everywhere for at least the rest of the day. read more

The LME announced that all trades will be voided from midnight to 8:15am on Tuesday when trading was halted, adding that it was considering a multi-day shutdown.

“People will wonder if this is really a working market… It’s supposed to be a market of last resort and people can’t get inventories to fill positions,” said Colin Hamilton, managing director of commodity research. of BMO Capital Markets. .

The LME also deferred physical delivery of expiring contracts and announced it would temporarily stop publishing official and closing nickel prices. read more

“The LME will be actively planning the reopening of the nickel market and will announce the mechanics of this to the market as soon as possible.”

DOUBLE PRICES IN HOURS

Three-month nickel on the LME more than doubled to $101,365 a tonne before the LME halted trading on its electronic systems and in the open circle of protests.

Nickel had cut gains to $80,000 a tonne when trading was halted, up 66% on the day and a staggering 177% since Monday.

In China, the Shanghai Futures Exchange raised fees for nickel trading, urging investors to “avoid risks, invest rationally and work together to maintain market stability.”

Nickel on the Shanghai bourse reached its upside limit in overnight trading at a record 267,700 yuan ($42,380.39) per tonne and also hit the 15% limit in early Tuesday morning.

CITIC Futures, China’s largest futures company, has warned clients that if nickel prices continue to rise on Wednesday, the Shanghai bourse could take action, including forced position cuts, an internal notice seen by Reuters showed.

Nickel LME discontinued after doubling

MARKET BATTLE

The explosive gains, which have seen prices quadruple over the past week, were the result of two major players clashing, said Malcolm Freeman of Kingdom Futures, who declined to identify them.

An entity controls between 50% and 80% of LME inventories, LME data shows.

“There’s a very big short and a very big long that they’ve been training. And because of their combat, a lot of other shorts have been brutalized,” Freeman said.

Some small industrial users have been caught in the crossfire as they took positions to get physical delivery but were later met with margin calls costing millions of dollars, he added. read more

Uncertainty caused by the Russian invasion and resulting sanctions has added to an already bullish nickel market due to low inventories, which have halved on the LME since October.

Not only does Russia supply about 10% of the world’s nickel, but Russia’s Nornickel is the world’s largest supplier of battery-grade nickel with 15-20% of global supply, said Dominic O’Kane, an analyst at JPMorgan.

The LME is owned by Hong Kong Exchanges and Clearing Ltd.

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Additional reporting by Praima Desai and Zandi Shabalala in London, Eileen Soreng in Bengaluru, Meg Shen in Hong Kong, Emily Chow in Beijing; edited by Jason Neeley

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