LME nickel rout: banks are partly to blame for nickel short squeeze, metal exchange boss says

London Metal Exchange CEO Matthew Chamberlain said banks lobbied last year against efforts to increase transparency in the metals market

Chamberlain has faced criticism since LME allowed nickel prices to skyrocket to more than US$100,000 a ton and retroactively cancelled US$3.9 billion of trades

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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: 12:02pm, 19 Mar 2022Updated: 12:49pm, 19 Mar 2022

The embattled boss of the London Metal Exchange says the banking industry bears some responsibility for the conditions that led to a massive short squeeze that broke the nickel market.

Banks last year lobbied against efforts to increase transparency in metals markets, LME chief executive officer Matthew Chamberlain said in an interview. The proposed changes would have allowed the LME to crack down on the large short position held by Tsingshan Holding Group Co before it caused an unprecedented 250 per cent price spike last week, he said.

Xiang Guangda, the Chinese nickel tycoon behind Tsingshan, has a short position of over 150,000 tons, Bloomberg has reported, but only 30,000 tons of it is held directly on the exchange. The remainder is held via bilateral, “over-the-counter” deals with banks led by JPMorgan Chase & Co, and including BNP Paribas SA, Standard Chartered Plc and United Overseas Bank Ltd.

“The OTC position has caused significant problems for the exchange,” Chamberlain said on Friday. After the LME made a proposal last year to allow the exchange greater visibility of positions held on the OTC market, “it was rebuffed by a number of banks,” he said. “I don’t think we will allow it to be rebuffed again.”

Chamberlain announced in January he would leave the LME to take on a new role at a blockchain start-up. In the interview, he refused to say if he would still leave the LME at the end of April as planned.

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