Update: LME nickel trading to resume March 16

Citing “further unprecedented overnight increases in the three-month nickel price,” London Metal Exchange (LME) CEO Matthew Chamberlain issued a notice March 8 saying LME’s management had reached “the decision to suspend trading for, at minimum, the remainder of today.”

He continued, “The LME, in close discussion with the Special Committee, has been monitoring the LME market and the effect of the evolving situation in Russia and Ukraine. It is evident that this has affected the nickel market in, particular, and given price moves in Asian hours this morning, the LME has taken this decision on orderly market grounds.”

One week later, on March 15, the LME announced that LME nickel contracts will resume trading at 8 a.m. London time Wednesday, March 16. The full notice to members, posted to the LME website, also “sets out details of the application of daily upper and lower price limits to all outright contracts in all base metals” and “sets out details of the deferral of delivery to Wednesday, March 23, at level for all nickel contracts entered into prior to Wednesday, March 16 and due for delivery between Wednesday the 16th and Tuesday, March 22,” adds the exchange.

The resumption follows a turbulent week in which, in an email to its readers, the United Kingdom-based Kallanish metals information service said nickel prices had risen by 90 percent to more than to some $55,000 per metric ton Monday before nearly doubling to reach $100,000 per metric ton in overnight trading.

The price then dropped down to $80,000 before the LME released its memo. Prior to Russia’s invasion of Ukraine, nickel’s historical peak was $51,800 per metric ton in May 2007, Kallanish says.

In his March 8 daily email, Shanghai-based commodities trader John Browning of Hong Kong-based BANDS Financial spelled out what scrap traders also have noticed: “LME prices, in particular, have become detached from their Chinese counterparts.”

While such an arbitrage opportunity could be considered an opportunity by some, in the scrap sector it temporarily resulted in fewer orders for American and European nonferrous scrap, one trader tells Recycling Today. Buyers in Asia are reluctant to have high-priced orders lose a double-digit percentage of their value if prices quickly move in the wrong direction.

Pertinent to scrap trading, the value of copper and aluminum also reached new highs during LME trading on Tuesday. According to Agence France-Presse (AFP), aluminum reached $4,026 per metric ton ($1.83 per pound), “the first time the lightweight metal had breached $4,000.” AFP says copper, meanwhile, hit a new record at $10,845 per metric ton ($4.92 per pound).

Regarding LME nickel, it means, “Trading of the LME Nickel contract on all venues of the LME market will be suspended as of 8:15 a.m. (London time) on 8 March 2022,” said Chamberlain on March 8. He added, “Trading will be disabled in LMEselect, and nickel trading will not be permitted on the Ring. Additionally, inter-office trades should not be booked for nickel after this time.”

In a section of his March 8 memo subtitled “Next steps,” Chamberlain wrote, “The LME will actively plan for the reopening of the nickel market and will announce the mechanics of this to the market as soon as possible. The LME will give consideration to a possible multiday closure, given the geopolitical situation which underlies recent price moves.”

As of March 11, trading had yet to resume, with the LME's March 10 Nickel Market Update, Notice 22/057, indicating that the criteria the organization established would need to be met to resume trading in its Notice 22/055--operational procedures to effect a safe reopening and analysis of the possibility of netting-off long and short positions prior to reopening--had not yet been met.

In Notice 22/057, the LME said it “is doing everything it can to reopen the market as safely and swiftly as possible” by continuing to work on appropriate operational procedures to effect a safe reopening, including particular price bands for nickel and all other physically deliverable contracts. “The LME intends to publish a Notice on price bands as soon as practicable, but this will not be before tomorrow (11 March 2022). Regarding netting off long and short positions, “the initial responses indicated limited potential uptake, particularly from those with short positions, and considerable differences in view on the appropriate price,” the LME wrote in Notice 22/057.

As first noted in its Notice 22/052, the LME's Notice 22/057 stated that “nickel delivery positions will continue to roll forward at level until delivery recommences on the first settlement business day following the resumption date.”

The LME also decided (Notice 22/054) to temporarily cease publishing its Official Prices and Closing Prices for nickel contracts for the time of the trading suspension.

*This article was updated March 11 and again March 15 to add information regarding the ongoing suspension of and then resumption of nickel trading on the LME.