Nickel prices double to $100,000 a ton, trading suspended in London

March 9, 2022: -On Tuesday, the London Metal Exchange suspended nickel trading after prices over doubled to surpass $100,000 per metric ton.

The LME said in a statement that trading would be suspended for nearly the remainder of the day.

“The LME plans for the reopening of the nickel market and will announce the mechanics of this to the market possible,” it added.

The exchange said that it had been monitoring the evolving situation in Russia and Ukraine. It was evident that this had affected the nickel market, which cited extreme price moves in Asian trading hours.

Commodity prices have been spiraling upward on supply fears related to Russia’s onslaught of Ukraine, with the ongoing war and an array of Western sanctions raising disruption fears.

On Tuesday, three-month nickel on the London Metal Exchange briefly increased to a record high of over $100,000 per metric ton before paring some gains.

Alongside energy, Russia is a key producer and exporter of metals and grains. Indeed, Russia is the world’s third-largest nickel producer — a key ingredient in stainless steel and a significant component in lithium-ion batteries.

Metal prices have soared as banks have cut their exposure to Russian commodities and shipping giants avoid its key ports.

Markets were already tight ahead of Moscow’s invasion of Ukraine, meaning there’s little ability to absorb any output cuts.

Ole Hansen, head of the commodity strategy at Saxo Bank, described the surge in nickel prices as “absolutely crazy.”

“It is a hazardous market right now as this is a market that is not driven by supply and demand; it is driven by fear,” Hansen told CNBC.

Hansen said market participants sought to take advantage of rallying commodity prices, assuming that Russian supplies would not be disrupted.

“Now, suddenly, a major funnel of supply from Russia has been cut off, especially in the metals space. And that leaves these participants holding a naked short which they need to get out of,” he added.

Short selling is a bearish investing practice in which an investor bets the price of an asset will fall. A short squeeze occurs when many investors are shorting an investment, the price rises sharply, and the investors exit their positions simultaneously, losing money. Because leaving a short place involves buy orders, the short squeeze pushes prices even higher.

Hansen said he is expecting the unwinding of global trade to lead to some significant losses in these markets.