(Bloomberg) — The London Metal Exchange’s suspension of nickel trading after soaring prices left brokers facing huge margin calls has also upended the market for a key industrial commodity.

The LME is responsible for setting benchmark prices in the international industry. Nickel is an important ingredient in stainless-steel and electric-vehicle battery production. But in recent years many consumers have come to favor other raw materials over the refined metal that underpins the bourse’s contracts, leaving them as largely passive observers of this week’s market meltdown.

“It’s like an iceberg, you’ve got the top trade-able above the surface, but there’s a whole lot of material beneath that pricing off it,” said Peter Hannah a commodities price development manager at Fastmarkets in Singapore. “And you can’t get those units onto the LME to ease a squeeze, they’re just passengers on the vehicle.” 

China, which has world’s biggest stainless steel and electric-vehicle battery industries, felt the impact immediately.

According to Susan Zou (an analyst at Rystad Energie in Shanghai), Chinese nickel sulfate producers stopped selling product because of a lack of visibility on the price. That’s raising concerns about a physical metal market that’s expected to tighten as EVs displace the combustion engine.

“Right now, given the volatility of nickel prices, whether the automakers still have confidence to develop their nickel rich battery driven business models is in question,” said Zou. “If the nickel price can be chaotic today, maybe it can also be in the future, when there’s a definite deficit forecast.”

In just two days, nickel saw a 250% increase due to fears about Russian supply interruptions. LME trading was suspended on Tuesday morning. There was also a significant disconnect with Shanghai contracts. These are the only places where daily maximum gains and minimum losses can be capped. Although Shanghai prices saw a reduction in their rise on Thursday and Friday due to the nickel squeeze, the ripple effects are far reaching beyond China.

Spanish stainless steel maker Acerinox has stopped any new orders for nickel since Thursday. The company said it couldn’t allow “soaring prices to be incorporated into the purchase prices of nickel and scrap,” and that such increases ran the risk of “breaking the market.”

It is clear that the market for nickel has a complex structure. This is evident in the increasing impact. Although the benchmark LME contract only covers Class 1 Nickel (with a minimum purity level of 99.8%), it accounts for less that a quarter total finished supply.

While battery makers use nickel sulfate, stainless steelmakers mainly utilize nickel pig iron, a cheaper product a pioneered in 2007 by Guangda’s Tsinghsan Holding Group Co. Due to rising prices, the Chinese company devised a method of using nickel pig iron found in large quantities in Indonesia. This created a substitute that was low quality. 

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