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LME stays shut for nickel trading

Trading in nickel remains frozen on the London Metal Exchange after being halted on 8 March for what the LME described as ‘disorderly’ market activity. On 10 March it said trading would not resume this week because two key conditions had not yet met.

The crisis hit when nickel prices doubled, touching US$ 100 000 per tonne at one point. According to the Financial Times, ‘The decision to suspend dealings and cancel all trades made on Tuesday is the biggest crisis at the 145-year-old exchange since a rogue trader at Japan’s Sumitomo Corporation racked up huge losses in the 1990s trying to corner the copper market.’

LME chief executive chief executive has told Bloomberg TV that if it hadn’t taken these measures, several brokers would have struggled to survive. The move has divided opinion in the sector with some accusing the LME of being heavy-handed and favouring bearish investors over the bulls.

The latest LME media release referenced the criteria needed for trading to resume. ‘These were: (i) operational procedures to effect a safe re-opening; and (ii) analysis of the possibility of netting-off long and short positions prior to re-opening. These criteria have not yet been met, and therefore the nickel market will not reopen tomorrow (11 March 2022). However, the LME is doing everything it can to reopen the market as safely and swiftly as possible.’

Reiterating earlier updates, the briefing says: ‘The LME and LME Clear had serious concerns about the ability of market participants to meet their resulting margin calls, raising the significant risk of multiple defaults and a consequent reduced ability for market participants to continue to access the market and manage their risk.’

It goes on: ‘A number of market participants have asked about market monitoring and whether the LME has commenced an investigation into the nickel market. While the LME cannot comment on any individual set of circumstances, the LME can confirm that it continually monitors the market for unusual or suspicious trading activity.’

Attention has focussed on the holdings of Xiang Guangda, the billionaire founder of China’s stainless steel producer Tsingshan Holding Group, which were said to be around 100 000 tonnes. However, in a statement to Chinese media, Xiang said Tsingshan did not have any problems with its nickel position or its operations.

Ahead of the latest problem, prices had been picking up because of the Russian invasion of Ukraine and subsequent sanctions, amid fears that nickel supplies for the growing electric vehicles market would be hit. Russia is said to be responsible for 12% of the world’s high-grade nickel.

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