Nickel plunges as traders fume over latest London metals mayhem
BNN Bloomberg
Nickel fell by the maximum allowed for a second day as the market seeks to reset from last week’s historic short squeeze, while brokers were left stunned as yet another glitch delayed the start of trading in London.
Nickel fell by the maximum allowed for a second day as the market seeks to reset from last week’s historic short squeeze, while brokers were left stunned as yet another glitch delayed the start of trading in London.
Nickel futures on the London Metal Exchange plunged by the 8 per cent daily limit on Thursday to US$41,945 a ton, although only a handful of trades were recorded. Prices dropped by the previous 5 per cent floor on Wednesday when the market opened from a week-long suspension imposed to try and restore order to the market after an unprecedented spike in nickel caused chaos across the metals industry.
The latest price drop brings the LME prices a little closer to the value of futures in Shanghai, which continued to trade during the London suspension. It’s also another indication that the short squeeze that has gripped the nickel market may be easing.
Prices had spiraled up 250 per cent in a little more than 24 hours early last week as top producer Tsingshan Group Holding Co. struggled to pay margin calls last week on its large nickel short position. The Chinese company announced a deal with its banks on Monday to avoid margin calls, which gave the LME confidence to reopen the market, and most traders and analysts had predicted prices would fall when trading resumed.
“It has become all but inevitable to have another round of limit-down for LME nickel as well, for at least for another 3 days if we are to follow the adjusted 8 per cent pace,” Marex said in a note before the London open on Thursday.
However, while the drop in prices was expected, the reopening of the London market has been anything but predictable. After a series of false starts on Wednesday that left exhausted traders exasperated with the LME, the problems started back up on Thursday even before trading had begun.
