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LME suspends nickel trading after prices soar past $100,000 -Breaking

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© Reuters. FILE PHOTO – Traders are seen working on the London Metal Exchange floor in London, Britain. September 27, 2018. REUTERS/Simon Dawson

Eric Onstad

LONDON (Reuters – Tuesday’s halt in nickel trading at the London Metal Exchange (LME). Prices jumped to a new record $100,000 per tonne within hours. The rise was fueled by a race for short positions, after Western sanctions threatened Russia’s major supplier.

It is a rare example of the panic caused by Russia’s incursion in Ukraine. This has led to buyers desperately searching for metal that can be used for steel production and for batteries for electric cars.

“The LME has taken this decision on orderly market grounds,” said the LME, one of the world’s top commodity exchanges, adding it was considering a closure of several days.

Effective close of business on Tuesday, the margin requirements for nickel contracts were increased by 12.5%, to $2,250 per tonne. Nickel trading was also suspended for the remainder of Tuesday.

“The LME is actively working to reopen the nickel market. It will also announce all details of its plans to the markets as quickly as possible.”

On Tuesday the LME nickel increased more than three months to $101,365 per ton, just before the LME suspended trade via its electronic systems.

“It’s likely a big margin call prompted the suspension of trading, with sharp gains forcing speculators to scramble for additional capital to put into accounts to cover the shortfall,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown (LON)

The exchange advised members who are in short position and cannot deliver or borrow metal with a backwardation not exceeding 1% of Monday’s cash price that they may be subject to delivery delays by LME instructions.

Because of low inventories, the uncertainty created by Russia’s invasion as well as resulting sanctions have fueled a bullish nickel market already positive.

Fears of more supply cuts have led to nickel prices quadrupling in the last week.

According to Dominic O’Kane, analyst at JPMorgan (NYSE:), Russia supplies around 10% of the world’s Nickel. However, Russia’s Nornickel has the largest supply of nickel for battery-grade batteries with 15%-20% global supply.

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