- The London Metal Exchange has halted nickel trading until at least Friday after prices surged 250%.
- It suspended trading after nickel was caught in the "mother of all short squeezes," an analyst said.
- Shanghai also paused trading in nickel futures Wednesday after prices surged 17% to their daily limit.
The London Metal Exchange doesn't expect to resume nickel trading until at least Friday in response to the turmoil in the market, after prices rose above $100,000 for the first time Tuesday in the largest move ever on the exchange.
The 145-year-old global center of metals trading said all trades of physically settled nickel contracts executed on or after midnight on 8 March on trading platforms such as the "LMEselect" will be canceled.
It was forced to suspend trading after the price of nickel more than doubled to above $100,000 per metric ton in the "mother of all short squeezes," said Craig Erlam, a senior market analyst at OANDA.
In a notice Tuesday, the exchange said it isn't appropriate to announce a trading resumption date for nickel, "given continued uncertainties in the broader market."
Nickel, a metal used in stainless steel and electric-vehicle batteries, has been at the epicenter of the fallout from the Ukraine war and the West's sanctions on Russia.
Russia is the third-largest producer of nickel, and sources 17% of the world's high-purity supply. Sanctions imposed on the country over its aggression in Ukraine have spooked an already tight market.
Trading on the LME might resume on Friday, around 9:00 a.m. London time, as the exchange works on ways to close a huge short position, the bulk of which is held by a Chinese nickel titan.
Its move to stop wild trading allowed Chinese players caught in a short squeeze to close out huge loss-making positions, Rabobank analysts said. A short squeeze happens when many investors bet against the value of a traded asset, but its price shoots up instead, forcing short sellers to close out losing positions, buy back shorted assets and push up the price further in the process.
The Chinese tycoon caught in the short squeeze controls the world's largest stainless steel and nickel producer — Tsingshan Holding Group — and had built up a large short position in nickel futures in recent months, Commerzbank said, citing industry sources.
Xiang Guangda — called the "Big Shot" in commodities circles — now faces losses worth $8 billion amid the massive upswing in nickel's price. His short position reportedly totaled around 100,000 tons of nickel.
Nickel futures trading on the Shanghai Futures Exchange also paused overnight after prices surged 17% to their daily limit of $42,373, according to Bloomberg. This meant there wouldn't be any more trades on China's top commodities bourse Wednesday, unless transactions wound up below that price.
In another effort to calm the market, the Shanghai bourse hiked transaction fees for nickel and other commodities.
Unlike the LME, commodity trades in China are subject to daily limits in order to avoid volatile swings. Prior to Wednesday's halt, nickel had risen to the local exchange's daily limits both on Monday and Tuesday.