LME suspends nickel trading after prices surge more than 110 per cent to over US$100,000 a ton

The massive short squeeze in nickel has embroiled a unit of China Construction Bank and Tsingshan Holding Group, the world’s largest producer of the metal

CCB International Holdings has been given additional time by the LME to pay hundreds of millions of dollars of margin calls it missed on Monday

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Traders, brokers and clerks on the trading floor of the open outcry pit at the London Metal Exchange, on February 28, 2022. Photo: Bloomberg

Published: 6:03pm, 8 Mar 2022

The London Metal Exchange halted trading in its nickel market after an unprecedented price spike left brokers struggling to pay margin calls against deeply unprofitable short positions.

Nickel, used in stainless steel and electric-vehicle batteries, surged as much as 111 per cent during the Asian day on Tuesday to trade briefly above US$100,000 a ton. The frenzied move – the largest-ever on the LME – came as investors and industrial users who had sold the metal scrambled to buy the contracts back after prices initially rallied on concerns about supplies from Russia, while brokers rushed to collect margin payments to cover their deeply unprofitable positions.

The massive short squeeze in nickel has embroiled a major Chinese bank as well as the largest producer of nickel, according to people familiar with the matter. Chinese entrepreneur Xiang Guangda – known as “Big Shot” – has for months held a large short position on the LME through his company, Tsingshan Holding Group, the world’s largest nickel and stainless steel producer.

In recent days, Tsingshan has been under growing pressure from its brokers to meet margin calls on that position – a market dynamic which has helped to drive prices ever higher.

An employee works at Nadezhda Metallurgical Plant of Nornickel company, the world’s leading nickel and palladium producer, in the Arctic city of Norilsk, Russia. Photo: Reuters

A unit of China Construction Bank, which is one of Tsingshan’s brokers, was given additional time by the LME to pay hundreds of millions of dollars of margin calls it missed on Monday. CCB International Holdings did not immediately respond to requests for comment, while Tsingshan representatives had no immediate comment on Tuesday.

Nickel had pared some gains to trade 66 per cent higher at US$80,000 a ton before the suspension. Other metals on the LME declined after the announcement.