LME confirms price limits for nickel trading when markets reopen tomorrow
Trading in nickel contracts on the London Metal Exchange (LME) will resume at 0800 GMT tomorrow, after being suspended for over a week.
LME has confirmed this will include daily upper and lower price limits – to ensure future rallies reflect the underlying value of the metal.
Transactions were halted last Tuesday after prices doubled to record prices – peaking at over $100,000 per tonne – after Chinese billionaire Xiang Guandga made a heavy bet against the metal, throwing the bourse into chaos.
The decision scrapped nearly $4bn worth of trades made on Tuesday morning.
This led the LME to conclude disorderly market conditions had arisen – causing them to pause trading as prices were no longer reflective of market behaviour and investor sentiment.
Prices were already elevated amid fears of supply shortages and disruption following Russia’s invasion of Ukraine.
Since then, the exchange has been holding conversations with stakeholders to assess current market conditions and the conditions for the resumption of trading.
Guangda is the founder of Tsingshan (Tsingshan) Holding Group – the world’s largest nickel producer.
Following the bet and the suspension of trading, Tsingshan has reached a standstill agreement with a consortium of unidentified banks for “a standby secured liquidity facility”.
These are secured loans that a borrower can use in part or in full when needed for a period to tie it over while it sorts out its margin and settlement obligations on the LME.
This was confirmed by LME, which noted that “a large client of the market has now published details relating to the support of a banking consortium, which could suggest that the potential for further disorderly conditions may be mitigated.”
Bloomberg has estimated that following the misplaced shorting, the company is potentially facing a $3bn loss.
The price controls were foreshadowed by Matthew Chamberlain LME chief executive.
He told Times Radio he would “definitely” consider whether the LME should limit short-selling following the debacle, despite previous pushback from sellers about potentially more supervision in the market.