By Pratima Desai

LONDON (Reuters – Nickel trading resumes at London Metal Exchange on Wednesday, with price limits to limit volatility after market swings caused a rare market closure.

China’s Tsingshan Holding Group purchased large quantities of nickel in order to make a bet on higher prices. This pushed the metal more than half to over $100,000 per tonne, sources claim. The LME was forced to stop trading.

Some traders stated that even though there is now a 5% cap on nickel prices moves by the LME, they remain cautious and will wait to see how it all turns out. Therefore, trading volume may be reduced on Wednesday.

Not only did the LME suspend nickel trading but extended the deadlines for people who had to deliver physical metal in accordance with its contracts.

Nickel, which is used in the manufacture of stainless steel, has been steadily rising even before conflict in Ukraine pushed prices even higher.

Russia is responsible for around 10% of the global nickel production. Traders were worried that supplies might be restricted by Western sanctions against Moscow.

LME Nickel contracts, such as the benchmark 3-month future, will have their daily prices limit at the closing price for the day. This is plus or minus 5 percent.

Three-month nickel traded at $80,000 per tonne, but the closing price was $48,078 on March 7, which meant that the trading range on Wednesday is $45,674-50,482.

LME indicated Tuesday that the LME would review this percentage and will move to a 15% limitation similar to what it placed this week on base metals. This is to be in place when the nickel market returns to normal.

“SITTING ON YOUR HANDS”

LME’s electronic trade system allows orders to be made starting at 0730 GMT. Nickel trading will begin at 0800 GMT.

Market will continue to be available even when price limits have been reached. Any bids or offers above this limit, however, will not be accepted.

Some traders still aren’t convinced and won’t take any risks for their clients, or themselves. This is especially true of smaller balance sheets.

One metal trader stated that the commodity markets have stabilized, with oil at $100/barrel and aluminum trading for $800/tonne over the past few days. So maybe trade can resume in an orderly manner.”

“But we don’t know tomorrow. Many people will just sit there and wait.

Last week’s record high of $139 per barrel and aluminum at $4,000/tonne set a new 14-year record as fears about Russian supply increased.

According to one metals trader, “The nickel market was tight for quite some time” and the prices have been increasing this year. It gained additional momentum from the Russia-Ukraine crise.

Tsingshan and a group banks have reached an agreement that will prevent them from making margin calls or closing out nickel trades.

LME stated, “The LME Notes… That a Large Client of the Market has Now Published Details relating to Support of a Banking Consortium. This could indicate that the potential of further disorderly circumstances may be minimized.”

Hong Kong Exchanges and Clearing Ltd. own the LME, which is considered to be the oldest and most important market in industrial metals.