Nickel passes $100 000 as big short tests 145-year-old exchange

Higher nickel prices, if sustained, threaten to ratchet up costs for electric-vehicle batteries and complicate the energy transition.
Image: Ron D'Raine/Bloomberg

Nickel soared past an unprecedented $100 000 a ton on the London Metal Exchange amid a huge short squeeze that’s embroiled a major state-owned Chinese bank and encouraged rule changes from one of the world’s top commodity exchanges.

The material used in stainless steel and electric-vehicle batteries surged as much as 111% Tuesday after rallying as much as 90% the day before. The market on the London Metal Exchange 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. Nickel rose 106% to $99 000 a ton as of 2:23 p.m. in Shanghai.

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.

Nickel was already rallying on tight supplies even before Russia’s invasion of Ukraine, which has sharpened fears of sweeping commodity shortages. Higher nickel prices, if sustained, threaten to ratchet up costs for electric-vehicle batteries and complicate the energy transition. Russia produces 17% of the world’s top-grade nickel.

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

The missed payments from CCBI Global Markets — the unit of China Construction Bank — aren’t necessarily an indicator of any problems at the parent company, which is one of China’s largest banks. It’s more likely due to a failure by one of the subsidiary’s metals-industry clients failing to make margin payments, according to one of the people familiar with the matter.

CCBI Global is a broker on the LME’s open-outcry trading floor.

© 2022 Bloomberg

COMMENTS   0

You must be signed in and an Insider Gold subscriber to comment.

SUBSCRIBE NOW SIGN IN

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR
BTC / USD

SEARCH COMPANIES
Enter company name or share code:

ECONOMIC DATA  

  CPIThe Consumer Price Index (CPI) measures monthly changes in prices for a range of consumer products Apr 2022 5.90%
  CPI ex OERThe Consumer Price Index excluding Owners’ Equivalent Rent (CPI ex OER) measures monthly changes in prices for a range of consumer products excluding Owners’ equivalent rent that measures changes in the cost of owner-occupied housing Apr 2022 6.40%
  RepoThe rate at which the Reserve Bank lends money to the country’s commercial banks and set by the Reserve Bank’s Monetary Policy Committee. May 2022 4.75%
  Prime lendingThe Prime Lending Rate is the rate of interest that commercial banks will charge their clients when issuing a loan (home loan or vehicle finance) May 2022 8.25%

Instrument Details  

You do not have any portfolios, please create one here.
You do not have an alert portfolio, please create one here.
INSIDER SUBSCRIPTION APP VIDEOS RADIO / LISTEN LIVE SHOP OFFERS WEBINARS NEWSLETTERS TRENDING

Follow us:

Search Articles:
Click a Company: