Nickel's $100k Spike on Short Squeeze Prompts Trading Halt

The London Metal Exchange (LME) halted nickel trading on Tuesday after prices briefly doubled to a record $100,000 per tonne, fuelled by a race to cover short positions after Western sanctions threatened supply from major producer Russia.

The rare move underscores the market panic created by Russia’s invasion of Ukraine with buyers scrambling for the metal crucial for making stainless steel and electric vehicle batteries.

“The LME has taken this decision on orderly market grounds,” said the LME, one of the world’s top commodity exchanges, adding it was considering a closure of several days. “The LME will actively plan for the reopening of the nickel market, and will announce the mechanics of this to the market as soon as possible.”

Three-month nickel on the LME CMNI3 had more than doubled on Tuesday to $101,365 a tonne before the LME halted trade on its electronic systems and in the open outcry ring. Three-month nickel on the London Metal Exchange CMNI3 was up 66.5% to $80,025 a tonne by 0635 GMT.

The uncertainty caused by Russia’s invasion and resulting sanctions has added to an already bullish nickel market due to low inventories.

Nickel prices have quadrupled over the past week on fears of further curbs on supply.

Supply Increase Seen Coming

Russia supplies the world with about 10% of its nickel needs, mainly for use in stainless steel and electric vehicle batteries.

“As sanctions against the Russians got rolled out last week with unprecedented speed, investors found themselves stripping away all Russian output from their supply and demand projections and marking up prices accordingly,” ED&F Man Capital Markets analyst Edward Meir said in a note.

Western nations put sanctions on Moscow to isolate it from global commerce and are now considering a ban on Russian oil imports, news of which drove crude prices to a 14-year high on Monday.

Logistics disruptions have also roiled commodity markets.

Inventories of nickel in LME-registered warehouses stand at 76,830 tonnes, their lowest since 2019.

“I think the market will cool off… There’s a lot of supply increase coming in 2022,” said Steven Brown, an independent consultant based in Australia.

That would include a lot of new nickel matte production from Indonesia to drive prices lower near the end of 2022, he added.

Prices of other industrial metals also jumped, with benchmark zinc CMZN3 and tin CMSN3 rising to record highs of $4,896 a tonne and $50,510 a tonne, respectively.

Stainless Steel Soars in China

China’s stainless steel futures soared by their daily limit of 12% to a record high on Tuesday, as raw material nickel prices more than doubled on intensifying concern over supply from Russia following its invasion of Ukraine.

The most-traded stainless steel contract on the Shanghai Futures Exchange SHSScv1, for April delivery, ended daytime trading locked at 22,125 yuan ($3,503.56) a tonne, notching a limit-up move.

China’s Wuxi Stainless Steel Exchange Center halted trading for nickel products from Tuesday, March 8, pending further notice, and raised trading limits for both stainless steel products and nickel since settlement on March 7.

“The prospect of a ban on Russian commodity exports was felt far and wide,” ANZ commodity strategists said in a note. “Fears over Russian supplies left buyers exposed to a short-term squeeze.”

FUNDAMENTALS

LME copper CMCU3 rose 3.6% to $10,648 a tonne, aluminium CMAL3 jumped 3.1% to $3,847, lead CMPB3 gained 6.4% to $2,605, zinc CMZN3 surged 11.3% to $4,551 and tin CMSN3 was 7.7% higher at $50,310.
ShFE (Shanghai) copper SCFcv1 edged 0.3% higher to 74,590 yuan a tonne, aluminium SAFcv1 dropped 2.6% to 23,210 yuan, zinc SZNcv1 gained 7% to 28,440 yuan, lead SPBcv1 rose 1.6% to 15,935 yuan and tin SSNcv1 climbed 12% to 391,400 yuan. Nickel SNIcv1 hit a limit up of 15%, having touched a record high of 228,810 yuan a tonne in early trade.