Nickel Topped $100,000 Briefly amid a Short Squeeze

Nickel rose briefly above $100,000 a ton on the London Metal Exchange amid a short squeeze that pushed a major Chinese bank to a margin call and incentivized rule changes of LME.

The metal is mostly used in stainless steel and electric-vehicle batteries soared as much as 111% to $101, 364 a ton after a close the previous day up by 66%.

The market on the LME is in the grip of a massive squeeze in which holders of substantial short positions are being forced to cover at a time of low liquidity.

In order to put the number to make sense, Nickel had soared around $11,000 a ton over the last fiver year. However, this week alone it rose as much as $72,000.

“It’s going crazy — it’s not reflecting any industry fundamentals,” said Jiang Hang, head of trading at Yonggang Resources Co, as reported by Bloomberg.

The “LME trading system is out of control and requires intervention,” or the contagion may spill over to other metals, he said.

Late Monday, the LME decided to allow traders to defer delivery obligations on all its main contracts — including nickel — in an unusual shift for a 145-year-old institution that touts itself as the “market of last resort” for metals.

The LME also gave a unit of China Construction Bank Corp. extra time to pay hundreds of millions of dollars in margin calls that were due Monday, according to people familiar with the matter.

“What we do know is that markets tend to over-react a little bit, they sometimes over-shoot,” Gavin Wendt, analyst at consultancy Mine Life Pty in Sydney said to Bloomberg.

“But in this instance, with the uncertainty of war, it’s hard to talk about a commodity being over-valued.”

Related Posts