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Nickel market stays closed after historic short squeeze

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It survived two world wars, the Spanish flu, and the numerous financial crises, but now the London Metal Exchange's iconic open-outcry trading ring is set to close for good.

Nickel trading remained suspended at the London Metal Exchange (LME) today – with no dates currently set for reopening the market.

Trading was halted on Tuesday when prices soared to an astonishing $100,000 per tonne – doubling to a new record over the course of one morning.

The LME subsequently closed trading – outlining the nickel market had become disorderly with prices no longer reflecting the underlying physical market.

To ensure market integrity, it took the dramatic step of scrapping $3.9bn worth of trades made prior to the suspension.

An LME spokesperson told City A.M.: ” The LME’s decisions were made with full regard to regulatory due process and were, in the LME’s view, in the interests of the market as a whole. We are now focused on the mechanics of reopening the market as efficiently and as quickly as possible.”

The price spike was primarily caused by huge short-selling bet against the metal from billionaire Xiang Guangda – the founder of China-based Tsingshan Holding, the world’s biggest nickel producer.

According to The Wall Street Journal, the company had built up the biggest short position in the metal and is now facing a hit of nearly $8bn.

While no date has been set for its reopening – the market has established criteria for commencing nickel trading again.

It said opening the market would require “operational procedures to effect a safe re-opening; and analysis of the possibility of netting-off long and short positions prior to re-opening”.

The criteria has seemingly not yet been met, although the LME has insisted it is doing everything it can to reopen the market as safely and swiftly as possible.

LME chief executive Matthew Chamberlain told Times Radio last week he would “definitely” consider whether the LME should limit short-selling following the debacle, despite previous pushback from sellers about potentially more supervision in the market.

He explained: “We’ve always been told by our market that they don’t want that, that they want this to be a true capitalist market where you can express a view one way or the other. But I think this situation will reopen that discussion, we’ll definitely be looking at this and seeing if we should have more powers of that nature.”