Nickel surges to record $100,000 a tonne amid Russia supply concerns
Nickel has skyrocketed above $100,000 (£76,211) a tonne thanks to a short-squeeze on the London Metal Exchange (LME), and supply concerns from Russia.
The price of the commodity, which is used in stainless steel and lithium-ion batteries, more than doubled on Tuesday, following a 70% rise on Monday, with traders with large short positions racing to cover their positions.
Russia is the third largest nickel producer in the world, meaning the current conflict is putting pressure on supply of the commodity. The metal ended last year at $20,757 a tonne, but this week alone Nickel has jumped by as much as $72,000.
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The LME has now suspended trading in the metal on the back of the news. “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,” it said in a statement.
The latest increase came after state-owned lender China Construction Bank was given extra time to pay margin calls for a client. The price later retreated to $80,000 a tonne when trading was suspended.
"It seems the meme stock frenzy has now metamorphosed into commodity chaos, as traders have scrambled to try and cover short positions," Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown said.
"Those that had bet against the metal’s rise in value, have now been forced to buy at a much higher price, creating a short squeeze. 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."
Jiang Hang, head of trading at Yonggang Resources, said: "It’s going crazy, it’s not reflecting any industry fundamentals. The LME trading system is out of control and requires intervention, or will affect other metals.”
Other metals such as tin, zinc and copper are also rallying on concerns that supplies from Russia will be disrupted as the war continues.
Palladium (PA=F) has also hit an all-time high, after jumping 80% this year, while aluminium (ALI=F) reached $4,000 per tonne on Monday and was up another 3.8% on Tuesday.
“Commodity markets are increasingly pricing in a scenario under which a significant portion of Russian supply will be excluded from the market,” Morgan Stanley said in a note this week.
“Prices are likely to remain highly volatile, until the real supply impact becomes clearer and prices can start to settle at a new equilibrium.”
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Elsewhere, European gas prices shot up by around a third on Tuesday, before they eased off slightly to gains of 18%, as Russia's top energy official said the country could cut off gas flows to the bloc through the existing Nord Stream pipeline.
European gas prices have doubled since Russia invaded Ukraine less than two weeks ago.
The day-ahead UK gas price has risen by nearly 10% to 565p per therm in early trading, more than 10 times higher than a year ago.
Oil prices are also up on the day, with Brent crude (BZ=F) 1% higher at $125.62 after hitting its highest since 2008 on Monday.
It comes as the US moves a step closer to imposing a ban on Russian crude imports. The White House said it was in "very active discussions" with allies about an embargo.
“Stagflation, an ugly mix of inflation and recession, is the fear stalking the markets right now and the longer the war rages, the more likely this scenario becomes,” AJ Bell investment director Russ Mould, said.