Metal traders endured another chaotic day yesterday as nickel prices came under continued heavy selling pressure, causing the price to drop below its new daily price limit for a second consecutive day.
Even after the London Metal Exchange widened the 5 per cent circuit breaker to an 8 per cent limit, the price of the metal quickly dropped to its limit of $41,495.
LMEselect, the 145-old exchange’s electronic system, has been hit by technical glitches since the market reopened.
On Wednesday the highly anticipated reopening of the nickel market came to an abrupt halt in the morning before resuming again in the afternoon after the price of the metal slipped by 5 per cent following a “systems error” that allowed a small number of trades to go through below the daily price limit. Yesterday, the LME said that some nickel orders could not be entered during the pre-open period via the system.
Circuit breakers were introduced by the exchange in order to prevent wild swings in the nickel price, which had surged amid fears that Russia’s invasion of Ukraine will disrupt supplies of the metal. However, the exchange has also imposed a 15 per cent limit on other metals.
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For today, the limit-down level will be about $38,590 a tonne. The market does not publish official nickel prices if prices move to their daily limit.
“We suspect that there will be more limit-down sessions, until the market finds an equilibrium level,” Edward Meir, an analyst at ED&F Man Capital Markets, said. “We will not know where they will stabilise until the limit down moves fully play out.”
The turmoil has been a blow to the exchange, which sits at the heart of the world’s trading of industrial metals. On March 8, trading was gripped by a short squeeze that caused prices to soar, with its benchmark three-month nickel futures briefly doubling to above $100,000 a tonne, by far its record level and its biggest jump.
While LME nickel was suspended, trading in the metal continued on the Shanghai Futures Exchange and prices there have been falling steadily to trade at about 219,440 yuan ($34,550) a tonne today, with many traders claiming that LME nickel will continue to slide until it reaches parity with the price of metal in China.
Russia is the world’s third largest producer of nickel, after Indonesia and the Philippines, making two thirds of the nickel production used to make stainless steel. Prices of other commodities including wheat, oil and natural gas have all jumped since Russia’s invasion.
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• Some creditors have received payment, in dollars, of Russian bond coupons which fell due this week, meaning that Russia may for now have averted what would have been its first external bond default in a century.
The Russian finance ministry said that it had sent funds to cover $117 million in coupon payments on two dollar-denominated sovereign bonds.
The payments, due on March 16 but with a 30-day grace period, are regarded as the first test of whether Moscow will meet its international debt obligations after western sanctions hobbled its financial dealings. JPMorgan, Russia’s correspondent bank, is reported to have processed the cash sent by the government and credited it to the paying agent, Citigroup.
