London Metal Exchange outcry after nickel trading halted again

The backlash against the London Metal Exchange reached fever pitch after nickel trading was halted for a third day in a row. 

After heavy selling at the opening bell, nickel dropped by 12 per cent to hit $36,915 a tonne yesterday morning – triggering the circuit breaker. 

The move provoked a furious backlash from traders, hedge funds and manufacturers who have experienced two weeks of chaos on the exchange. 

Hedge funds in particular have felt the brunt of the debacle as many had been set to make millions from betting that the price of nickel would go up, only for the trades to be cancelled by the LME. 

Clifford Asness, co-founder of US hedge fund AQR Capital, tweeted: ‘If we are on the wrong side of a short-squeeze we have to pay up, but if we are luckily on the right side we get it taken away.’ 

Trouble started on March 8 after nickel prices jumped on supply fears relating to Russia’s invasion of Ukraine. Nickel prices more than doubled in a matter of hours, climbing above $100,000 a tonne as one of the world’s top producers, China’s Tsingshan Group, bought large amounts to reduce its short bets on the metal. 

Trading had to be halted as the move exacerbated a price rally at a time when metals were already spiralling upward on fears the war would cause supply issues. The LME allowed trading to resume on Wednesday this week – with price limits – after Tsingshan reached a deal with its banks to avoid further margin calls. 

But within minutes, the highly anticipated reopening of the nickel market descended into farce as the price spiralled down by more than 5 per cent as traders tried desperately to sell up and exit the market. The LME installed a trading range of 5 per cent on Wednesday which was widened to 8 per cent for Thursday, and then 12 per cent yesterday, none of which worked.

Many believe the LME has lost all credibility and is not fit for purpose. 

John Meyer, analyst at SP Angel, said: ‘The market is not working. Nobody knows what the price on screen is. Most traders just want out now and have turned their attention to the nickel exchanges in Shanghai and the US.’ 

The events have damaged the reputation of the 145-year-old exchange, which had been viewed as the world’s premier metal market. 

Matthew Chamberlain, chief executive of the LME, said that the exchange was ‘absolutely mindful of the impact that this has had on so many people and we need to make sure that it doesn’t happen again’. 

He added: ‘The nickel market has always been known as the wild beast but the scenes of the past two weeks have taken it to a new level.’