Nickel Prices Swing Wildly, Shattering 15% LME Daily Limit

Nickel prices continue to swing suddenly and have now fallen such that they reached the 15% daily limit on the London Metal Exchange last Thursday. This occurred as the market attempted to recover after a week of trading disruption and unprecedented short position compression. 

After reaching a new daily limit introduced by the LME to stabilize the market, prices rose again by 14%. Even when nickel futures reopened on March 16, trading was halted as the metal again plunged to the limit at the open each morning. 

In the first days of March, nickel prices climbed 250% during trading in which it reached a record $101,365 per tonne amid a short squeeze centered on China’s Tsingshan Holding Group Co. Despite interventions by the exchange including a week-long suspension and the cancellation of billions of dollars of trades at higher prices, the market fell. Now the market is down 70% from the all-time high and up more than 30% since the beginning of March. 

In order to avoid asking for more margins, Tsingshan reached an agreement with the banks. However, there are still downside bets in the market to be eliminated at a time when supply fears are latently on the rise.

Nickel prices are now in line with nickel contracts on the Shanghai futures exchange which had a minor rally during the March turmoil and fell as a commodity sell-off that occurred amid the week-long LME suspension. 

Trading in the metal is becoming increasingly difficult to conduct each day so many investors are looking to liquidate their positions due to the metal’s poor market performance.

As China continues to grapple with the spread of Covid-19 in Shanghai, its worst outbreak of the virus in two years, metal trading on the Shanghai futures market has started to calm down and investors are becoming more cautious by the day.

With the resurgence of coronavirus in China, the world’s largest producer and consumer of base metals, the country’s industrial bases have been forced to shut down leading to disruptions in logistics, manufacturing and consumption. 

Prices continue to be volatile as markets decide how much the impact of further lockdowns in mainland China, and a surge in cases in Hong Kong could be.

 

The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a licensed professional for investment advice. The author is not an insider or shareholder of any of the companies mentioned above.

By Matthew Evanoff

I cover the mining industry and the best mining stocks around the world. I write about industry news, individual companies, projects, management, and profiles on industry leaders.

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