When the price of nickel on the London Metal Exchange (LME) skyrocketed, China Tsingshan Holdings’ 300,000-ton nickel short order suffered an epic short squeeze. (FCA) and the Bank of England (BoE) on Monday (4th) questioned the transparency of the LME, and jointly issued a statement saying that they would investigate thoroughly.
The joint statement mentioned that the FCA plans to review the LME’s approach to managing the suspension and resumption of the nickel market, and plans to appoint experienced persons to review and report. The Bank of England and its Prudential Regulation Authority (PRA) will focus on the orderly resumption of trading in the nickel market, and will consider the review report to determine whether to take further action and announce future steps.
PRA and FCA will communicate with institutions holding high nickel positions in the market according to the supervision process, and evaluate the risk management and governance of relevant institutions during the nickel market. If investigators find the LME guilty, this could lead to potential fines or follow-up action.
Aoyama got out of trouble in the demon nickel incident
Tsingshan Holdings is the world’s largest nickel exporter and the world’s largest stainless steel producer. Since 2021, it has begun to accumulate short positions in LME nickel futures. The price of nickel futures closed at $20,757 per ton last year, but Russia was not expected to be sanctioned by the West. After that, nickel prices began to skyrocket, and nickel futures reached a record high of $101,365 per ton on March 8.
Qingshan, who held a short order of 300,000 tons of nickel, suffered an epic short squeeze, lost billions of dollars overnight, and even failed to pay the margin in time.
Surprisingly, the LME subsequently announced that all trading on March 8 was cancelled and trading was suspended for a week. It was not until March 16 that a new trading system with price limits was introduced, and Aoyama retreated.
The LME seems to be deliberately protecting Tsingshan and canceling 5,000 nickel transactions. This move that did not remain neutral caused public anger. Various brokers and hedge fund companies slammed the LME, and even threatened to sue. Several British and American media even called for The British supervisory unit is involved in the investigation.
Nickel futures rose 3.5% to $33,219 a tonne in London trading on Monday.