The invasion of Ukraine by Russia, and the subsequent sanctions placed on Russia by most of the world, have broken the nickel market. Russia is one of the world’s largest nickel exporters and attempts to shut off that supply have led to market fallout. The FT reports:
The London Metal Exchange suspended trading in one of its main contracts after a vicious “short squeeze” sent the price of nickel soaring and left a Chinese metals tycoon facing billions of dollars in potential losses.
Nickel prices doubled on Tuesday and briefly rose above a record $100,000 a tonne as banks and brokers rushed to close part of a huge position amassed by Xiang Guangda, the billionaire founder of China’s leading stainless steel producer Tsingshan Holding Group. It later pulled back closer to $80,000.
Xiang had bet that the price of nickel would fall, but when the market moved sharply the other way, he would have been required to either post more cash to cover his losses or buy back the position.
The move on Tuesday followed a jump of more than 70 per cent in the previous session as rumours about the size of Xiang’s position swirled around London’s tight-knit metals market.
The size of Xiang’s short position is unclear but it is at least 100,000 tonnes of nickel, according to people with familiar with the matter, who said the LME had been forced to act when it became clear that some of its small members were also facing large demands for extra cash to cover trades put on for clients.
Several market participants said Xiang faced potential losses stretching into billions of dollars given the size of the trade, but that the figure could change depending on where nickel prices reopen.
Read more here.
