Nickel is trading at last on LME as buyers return after squeeze

Image courtesy of LME.

Nickel volumes surged as prices traded within the London Metal Exchange’s daily limits for the first time since reopening last week, in a sign that the market is starting to stabilize after an unprecedented squeeze sent prices spiking.

The flurry of deals on Tuesday came as LME prices moved back into line with nickel contracts trading on the Shanghai Futures Exchange, which remained open during a weeklong suspension of trading in London in the wake of the short squeeze. More than 11,300 contracts, or 67,800 tons of nickel, had traded by 2:18 p.m, while LME prices pared sharp early losses as the evening session got underway on the rival Chinese bourse.

Nickel trading had been largely frozen since the market reopened on March 16 as the exchange’s daily limits prevented futures from falling to a level where buyers were willing to step in. Bullish investors looking to unwind their positions had been caught in a long queue of sellers over the past few days as prices lurched lower in daily limit-down moves.

The industrial metals industry relies on LME prices as benchmarks for physical transactions, while financial investors in products like commodity indexes use the exchange’s prices to value their positions. 

Related: The 18 minutes of trading chaos that broke the nickel market

LME nickel was trading 6% lower at $29,510 ton at 2:20 p.m, rebounding from a loss of as much as 15%. SHFE prices rose 1.6% to 210,040 yuan a ton, which is equivalent to about to $29,200 a ton once currency conversions and VAT deductions are taken into account.

By the close of trading on the LME, nickel fell 10% to settle at $28,159 a ton. In other metals, copper, aluminum, tin and zinc slipped in London, while lead advanced.

The exchange also set so-called official prices during a lunchtime trading session on its open-outcry trading floor, marking the first time it’s set the widely-used benchmark since March 7, the day prior to the suspension.

“It is now logical with the situation surrounding that squeeze having been resolved that we would come back down to a more normalized level, and obviously the Shanghai price is a good guide there,” LME Chief Executive Matthew Chamberlain said on Bloomberg TV shortly before the market opened. “There is a good chance we’ll discover a price over the next couple of days, and possibly even today.”

Chamberlain faced furious criticism from users for the exchange’s decisions over the past two weeks, after it allowed nickel prices to skyrocket to more than $100,000 a ton, then suspended trading and retroactively canceled $3.9 billion of trades.

The restart of nickel trading since Wednesday has also been hit by a series of glitches in the electronic market.

Other metals on the LME were mixed on Tuesday, with aluminum gaining 0.5%.

(By Mark Burton and Jack Farchy)


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