Nickel trading has resumed on the London Metal Exchange (LME) a week after a rare market shutdown was ordered following an exponential rise in the metal which saw its price rise 250 percent to more than $100,000 per tonne in just two days.
The LME had suspended trading on the metal for just the second time in its history after brokers had been unable to seek cover for unprofitable short positions due to an unprecedented rise in prices, which also put pressure on one of the major nickel producers and a major Chinese bank.
The parabolic price movement, which began shortly after the Biden government considered banning Russian crude oil imports, placed enormous pressure on commodity markets on Monday, particularly in the oil, gas, nickel, aluminum, palladium, and wheat markets. According to Bloomberg, each has reached a multi-year high or a new record.
How Hungary plans to keep gas prices down
Panic buying and fuel tourism are stretching domestic refinery capacity
Nickel is used in the manufacture of stainless steel and in batteries for electric vehicles. It has risen in price by more than 25 percent in the past year, reaching its highest level in a decade last month.
Demand is booming, with a shortage of metal used for electric car batteries, and so far, there are few signs that market prices are falling. Goldman Sachs Group Inc. predicted last month that demand for nickel would exceed supply by 30,000 tonnes this year, up from 13,000 tonnes previously.
One of the victims is Chinese entrepreneur Xiang Guangda — also known as the “Big Shot” — who has accumulated a huge short position in nickel futures and is now facing a multi-billion dollar market loss.
Guangda, who controls Tsingshan Holding Group, one of the world’s largest nickel producers, was forced to close the entire position. It is not known how much Guangda lost but it has been reported to have exceeded $2 billion.
Despite the reopening of the market on Wednesday, albeit with restrictions, traders remain cautious about the volatility of the metal’s position and are biding their time before dipping back into the market.
“Commodity markets overall have calmed down, oil is back below $100 a barrel and aluminium has come off $800 a tonne in the last few days, so maybe trade will resume in an orderly fashion,” one metals trader told Reuters news agency.
“But how can we know what will happen tomorrow. A lot of people will be sitting on their hands,” they added.