The London Metal Exchange has suspended trading in its nickel contract after the price doubled on Tuesday and soared to a high of over $ 100,000 a ton amid a vicious short squeeze.
The 145-year-old stock exchange said it was clear that the “developing situation in Russia and Ukraine” had affected the nickel market, and given the extreme price movements during trading hours in Asia it made the decision to stop trading in an “orderly market base”.
“The LME will actively plan the reopening of the nickel market, and will announce its mechanics to the market as soon as possible,” the statement said.
The conflict in Ukraine has caused huge volatility in commodity markets due to Russia’s status as a major supplier of energy, metals and food products, but so far trade has continued in all major contracts.
The price of LME’s three-month nickel contract doubled in Asian trading on Tuesday and briefly rose above $ 100,000 a tonne following a jump of more than 70 percent on Monday.
The latest rise came after China Construction Bank, a large state-owned lender, was given more time to pay profit calls for a customer. The price later withdrew and was about $ 80,000 per ton when trading stopped.
The rise is the most unusual in the history of the LME, which prides itself on being the latest market for industrial metals such as nickel, copper, aluminum and zinc.
The decision to suspend trading comes after the LME introduced a number of changes to emergency rules late Monday in its major contracts.
The changes included a restriction on the reversal of short-term spreads – whereby spot contracts are traded at a premium to futures contracts, indicating a lack of supply in the market – and provisions for holders of several short positions to avoid handing over the metal.
The stock market is currently considering a possible closure for a few days of the nickel contract, given the geopolitical situation underlying the recent price moves.
“In this context, the LME will also make arrangements for dealing with imminent shipments,” it read. The LME is owned by the Hong Kong Exchange and Clearing.
Unlike most futures exchanges, LME’s contracts can be physically regulated from metal that is in its chain of approved warehouses, stretching from Rotterdam to Malaysia.
This link makes the stock market the leading price setter for industrial metals and the latest starting market for consumers in need of raw materials. Its customers include large physical manufacturers and industrial consumers of metal seeking to hedge their exposure to prices.
Nickel is used to make stainless steel, but the fastest growing market for the metal is in batteries that drive electric vehicles.
The largest manufacturer of high-grade nickel for the automotive industry is Russia and the fear that supplies could go awry following the war has caused prices to start rising over the past week.
But progress has become parabolic in recent days, as brokers rushed to cover positions for their clients and withdrew from the market when the short barrier took hold.
“We expect more interval calls to still be triggered,” said traders at Marex, a commodity brokerage.
CCB was given extra time to pay hundreds of millions of dollars in fringe calls that were supposed to be on Monday on behalf of a customer, according to Bloomberg. The bank’s response could not be obtained immediately.
The leading Chinese nickel manufacturer is Tsingshan Holding Group, a privately owned company that has expanded aggressively.
Asked about Qingshan’s possible role in the rise in nickel prices, the company’s representative told the Financial Associated Press, a Shanghai news organization, that it “has already held a meeting this morning, arranging the relevant materials and content. And will give a public response in due course.”
Demand for high-grade nickel was already expected to exceed supply this year due to the growing popularity of electric vehicles.
Goldman Sachs forecast a deficit of 100,000 tons, about the same level as world stocks. “The market is moving fast to price the destruction of demand,” said Nicholas Snowdon, a bank analyst.
The conflict in Ukraine has Tropical global metal markets As prices rose sharply as industrial consumers tried to lock in supply in anticipation of supply disruptions while margin calls forced closing short positions.
LME suspends nickel trading after contract soars to $100,000 a tonne Source link LME suspends nickel trading after contract soars to $100,000 a tonne