LME boss says banks are partly to blame for nickel short squeeze
BNN Bloomberg
The embattled boss of the London Metal Exchange says the banking industry bears some responsibility for the conditions that led to a massive short squeeze that broke the nickel market.
The embattled boss of the London Metal Exchange says the banking industry bears some responsibility for the conditions that led to a massive short squeeze that broke the nickel market.
Banks last year lobbied against efforts to increase transparency in metals markets, LME Chief Executive Officer Matthew Chamberlain said in an interview. The proposed changes would have allowed the LME to crack down on the large short position held by Tsingshan Holding Group Co. before it caused an unprecedented 250 per cent price spike last week, he said.
Xiang Guangda, the Chinese nickel tycoon behind Tsingshan, has a short position of over 150,000 tons, Bloomberg has reported, but only 30,000 tons of it is held directly on the exchange. The remainder is held via bilateral, “over-the-counter” deals with banks led by JPMorgan Chase & Co., and including BNP Paribas SA, Standard Chartered Plc and United Overseas Bank Ltd.
“The OTC position has caused significant problems for the exchange,” Chamberlain said on Friday. After the LME made a proposal last year to allow the exchange greater visibility of positions held on the OTC market, “it was rebuffed by a number of banks,” he said. “I don’t think we will allow it to be rebuffed again.”
Chamberlain announced in January he would leave the LME to take on a new role at a blockchain startup. In the interview, he refused to say if he would still leave the LME at the end of April as planned.
He called for greater regulation of the over-the-counter commodity markets, comparable to measures taken elsewhere in the wake of the global financial crisis in 2008.
Manufacturing sales fell 2.1 per cent to $69.9 billion in March as sales of petroleum and coal products and motor vehicles fell, Statistics Canada said Wednesday. Olivia Cross, North America economist at Capital Economics, said the result was not as bad as the early estimate that pointed to a drop of 2.8 per cent, but it still means sales fell 0.9 per cent over the first quarter. "The weakness of manufacturing sales in March suggests that the economy lost momentum heading into the second quarter, matching the message from the earlier preliminary estimates for retail sales and GDP," Cross said in a note. Last month, Statistics Canada released a pair of preliminary estimates for real gross domestic product and retail sales for March that both suggested the data points were essentially unchanged for the month. Driving the manufacturing sales numbers for March was an 8.0 per cent drop in sales of petroleum and coal products to $8.0 billion as volumes fell 6.1 per cent. Sales of motor vehicles fell 7.9 per cent to $4.6 billion in March as sales of motor vehicle parts lost 2.8 per cent. Statistics Canada says retoolings at several major auto assembly plants in Ontario continued to impact auto manufacturing and contributed to the lower sales for the month. Meanwhile, sales of machinery rose 2.9 per cent to $4.5 billion in March. The increase came as sales in all seven machinery industry groups climbed higher, led by commercial and service industry machinery which gained 41.6 per cent. Overall manufacturing sales in constant dollars fell 2.0 per cent in March. Total inventories for the month were largely unchanged at $121.0 billion in March, while unfilled orders fell 0.8 per cent to $104.8 billion. This report by The Canadian Press was first published May 15, 2024.