The LME took the decision following the discovery of nickel that failed to meet contract specifications at an LME warehouse.

The London Metal Exchange (LME) will delay the reopening of nickel trading during Asian hours by a week to 27 March after reportedly cancelling nine nickel warrants affecting 54t of material. It refused to name the location of the warehouse facility and does not believe any other LME facilities were impacted. However, it urged all warehouse operators to undertake inspections of warranted nickel, during which time, it has taken the decision to delay a return to Asian nickel trading hours.

However, according to a Bloomberg report, which cited sources familiar with the matter, the bags in question were located at a warehouse owned by Access World in Rotterdam and contained stones rather than nickel briquettes.

The development represents the latest in a series of negative headlines for the global nickel trade, which has come under increasing scrutiny. Trading giant Trafigura last month alleged it was the subject of a “systematic fraud” worth US$577M, uncovering shipments that did not contain nickel. Trafigura has since clarified that it is not the owner of any of the nine warrants that have been invalidated by the LME.

Nickel trading during Asian hours was paused following a massive short squeeze on the LME nickel exchange in March 2022. This led to the three-month nickel price temporarily rocketing to more than US$100,000/t on 8 March 2022 and the LME cancelling all trades that took place on the day and putting in a trading freeze. As a result, trust in the exchange was undermined and trading has become greatly reduced. Since then, the LME nickel price has increasingly detached from market fundamentals, with minor alterations to supply/demand resulting in wild price fluctuations. This is not aided by the fact that all recent growth in refined nickel products has largely been in the form of nickel pig iron (NPI) and nickel sulphate, which are not deliverable against either the LME or Shanghai Futures Exchange (SHFE).

Even by nickel’s volatile standards, 2022 was exceptional with the annual price averaging US$25,638/t in 2022, up 39% y-on-y. However, with LME nickel prices dropping below US$23,000/t in mid-March, there are signs that the price is starting to normalise from the inflated highs witnessed through much of last year. The LME hopes that a resumption of nickel trading during hours later this month will boost liquidity on the contract and be more reflective of current market fundamentals.