Nickel futures weren’t trading anywhere globally on Wednesday after prices in Shanghai reached their daily upper limit following unusual swings and a trading halt on the London Metal Exchange (LME). Chinese metals tycoon Tsingshan Holding Group may face potential steep losses stretching into billions of dollars.
The metal’s price rose 17% overnight on China’s biggest commodities exchange, the Shanghai Futures Exchange (SHFE), reaching the daily limit of 267,700 yuan (42,373 dollars). That means no more deals will be made during the current session, which ends at 3 p.m. local time unless completed below that price.
In the meantime, after prices on the LME rocketed by 250% in two days, it’s a relatively quiet time in the world of nickel trading. Because of the record rise, the 145-year-old exchange had to suspend nickel trading on Tuesday. The LME stated that it does not expect nickel trading to resume until Friday.
The sharp rise in nickel was fueled by a squeeze that pushed Tsingshan Holding Group Co. and its brokers to liquidate certain short positions that they had built up over months.
According to Bloomberg, on the LME, Tsingshan has a short position of 100,000 tons of nickel. When holdings acquired through intermediaries are considered, it might be substantially higher. That implies it would have lost well over 2 billion dollars daily at the peak of Monday’s nickel rally.
Unlike on the LME, commodity futures in China are subject to daily price swing limitations to minimize large spikes in volatility. Nickel reached the daily limit of the SHFE on Monday and Tuesday before being halted on Wednesday. Another move to calm the market was the bourse’s increase in transaction fees for nickel and other commodities.
The LME doesn’t usually impose limits on intraday trading. However, after these unprecedented super hikes, the exchange said it would cap nickel’s moves at 10% after its resume. Trading is expected to start during European hours only at first. Although the exchange subsequently announced it would cancel all deals made in the hours before the suspension, the metal soared by as much as 110% on Tuesday, the highest level ever.
Nickel is a critical element used in stainless steel and electric vehicle batteries. Moscow’s invasion of Ukraine and the West’s sanctions on Russia, a key major nickel supplier, have electrified an already bullish nickel market.