Why the LME has suspended nickel trading for more than $100,000 a ton, Market News

From oil to wheat, through copper or palladium, it boils. The conflict in Ukraine, sparked on Feb. 24 by Vladimir Putin, has taken many base metals out of the shadows, causing their stock prices to explode. Last example: nickel. This silvery-white metal, used to make stainless steel and batteries for electric vehicles, crossed the token threshold of $100,000 a ton early Tuesday to reach $101,365 on the London Metal Exchange (LME), the London metal exchange, peaking at its highest level in 145 years. … The 250% increase in two days is so spectacular that the regulator has decided to implement emergency measures. All three month futures trading will be suspended for one day. at least », and operators are required to meet their delivery obligations on all major metal contracts. If the closure were to be extended, the LME assures that it will make arrangements to meet future nickel supplies.

margin call

Behind this market disruption would be a major Chinese bank, as well as the country’s largest nickel producer, Bloomberg news agency said, citing sources familiar with the matter. Both are hurt by the soaring nickel price as they built up short positions on the metal. The group in question is Tsingshan, led by a certain Xiang Guangda, also known as “Big Shot”. Over several months he is said to have taken significant short positions in nickel. With the recent price spike, his strategy proved unsuccessful. However, he is obliged to buy the metal in order to close his position and respect the terms of his contract, which has artificially inflated prices. In his wake, Tsingshan dragged his broker, China Construction Bank Corp. The latter was given extra time by the LME to pay hundreds of millions of dollars in margin calls that he should have honored Monday.

For older traders, this scenario is reminiscent of the tin crisis that occurred in the fall of 1985. At the time, the regulator had no choice but to suspend the tin trade for four years, leaving many brokers out of business. For Malcom Freeman, at Kingdom Futures, quoted by Bloomberg, the LME’s decision is the ” good thing to do. I have a feeling she will probably also consider canceling today’s surgeries† On its site, the LME indicates that it will calculate ” margin calls, provisionally based on the closing price on Monday 7 March or about $48,000 per ton. † LME Clear will consider any additional steps that need to be taken from a risk management perspective the press release says.

Even before this episode, nickel had risen sharply. † Russia is the world’s third largest producer of nickel and the largest producer of primary nickel products, such as refined nickel needed for electric vehicle batteries. “ recalls Benjamin Louvet, commodity manager at OFI AM. For now, the country’s major metal producers have been spared sanctions, but many of the companies in this sector are run by oligarchs close to Vladimir Putin, such as Norilsk Nickel president Vladimir Potanin. It is currently not on the sanctions list. If retaliatory action were taken, the consequences would be significant, especially for the car. Electric mobility is based on nickel. † This would increase the price of batteries and provide a significant benefit to Chinese manufacturers who would have to keep their supply intact, or even increase their supply by reclaiming some of Russia’s exports. ‘, says Benjamin Louvet. To date, 37% of Russian exports go to the Netherlands and 16% to Germany. What solutions to loosen the vice? Some countries, such as Indonesia, could increase their production.