London Metal Exchange extends nickel freeze after scrapping $3.9bn worth of trades
The London Metal Exchange confirmed last night that nickel trading would remain suspended until next week after it took the drastic step to halt trading and scrap around $3.9bn worth of trades on Tuesday.
The LME took the decision to shutter the nickel market as prices surged amid a wider spike in commodities sparked by Russia’s invasion of Ukraine.
Bosses at LME said they took the decision to freeze trading as prices “did not reflect the underlying physical market” and it had become “disorderly”, the first time it has taken the decision to suspend trading since 1985.
The LME then took the controversial step to cancel round $3.9bn of trades which has sparked backlash from some traders.
Volatile prices led to huge paper losses for some traders, with China-based Tsingshan Holding, the world’s biggest nickel producer which had built up the biggest short position in the metal, was facing a hit of $8bn, The Wall Street Journal reported.
The LME said yesterday it would require “operational procedures to effect a safe re-opening; and analysis of the possibility of netting-off long and short positions prior to re-opening”.
“These criteria have not yet been met, and therefore the Nickel market will not reopen tomorrow,” the exchange said.” However, the LME is doing everything it can to reopen the market as safely and swiftly as possible.”
The extreme volatility has already spooked some investors. Luke Sadrian, who manages Commodities World Capital and has been trading on the exchange for thirty years, said the uncertainty of the past week had led him to walk away fro the London Metals exchange, Bloomberg reported.
“The LME has been my bread and butter for a very long time, so it’s heartbreaking,” Sadrian told Bloomberg News.
“Given the current uncertainty, I am exiting all of my LME positions, despite being ragingly bullish on copper.”