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Nickel Trading Suspended As Prices Double In Short Squeeze

Nickel trading was suspended on the London Metals Exchange (LME) on Tuesday after prices doubled from Monday to $100,000 per ton as short sellers raced to cover bearish bets after Russia's invasion of Ukraine sparked a huge rally in metals and energy and agricultural commodities.

Nickel prices had already soared by over 30 percent on Monday, triggered by a major short squeeze amid fears that supply from Russia would be disrupted by the war in Ukraine and the sanctions against Moscow. Russia supplies around 7 percent of global volumes of nickel, a key metal for EV batteries. 

Monday's move was the largest daily percentage surge in nickel prices ever. Fears that supply would be disrupted prompted a massive short squeeze, which sends prices higher.  

On Tuesday, the move higher was even steeper after prices doubled in just a few hours. The London Metal Exchange said it was suspending trading in nickel, with immediate effect. The LME cancelled all trades executed on or after 00:00 UK time on March 8, 2022 in the inter-office market and on LME select until further notice. 

"There's a very big short and a very big long who've been sparring. And because of their sparring, it's brutalised so many other shorts," Malcolm Freeman of Kingdom Futures told Reuters on Tuesday, commenting on the short squeeze.

The halt of nickel trading today is the biggest crisis on the LME since the 1990s, when the so-called Mr Copper, a trader from Japanese firm Sumitomo, tried to corner the world copper market with aggressive and illegal investment strategies.

Commenting on today's nickel price moves, Ole Hansen, Head of Commodity Strategy at Saxo Bank, told CNBC:

"It is a very dangerous market right now because this is a market that is not driven by supply and demand, it is driven by fear."

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Since Russia's invasion of Ukraine on February 23, nickel prices have surged the most to date, by 227%, overtaking natural gas, which has jumped by 176%, according to data compiled by Bloomberg and Saxo Group shared by Hansen. The nickel price surge is driven by "driven by focus on margin calls, financial risks and low liquidity," Hansen noted.

By Tsvetana Paraskova for Oilprice.com

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