London, (Business News Report)|| The London Metal Exchange has suspended trading in nickel after a massive 250% rise, on Tuesday.
This unprecedented rise in its history came in light of investors’ fears of a shortage of supplies due to the Russian-Ukrainian war.
Investors and industrial users who sold nickel rushed to buy back contracts, after prices initially rose, due to concerns about supplies from Russia.
A ton of nickel metal, which is used to make stainless steel and electric vehicle batteries, was traded at $101,365 for a brief period, nearly double the price it recorded at its peak in 2007. It later declined to $82,195.
This disaster evokes memories of the darkest period in the London Metal Exchange, according to the Bloomberg, which is the “tin crisis” in 1985, which led to the exchange suspending tin trading for four years and prompting many brokers to leave work.
This was prompted by the collapse of the International Tin Council, a body backed by 22 governments, when it could no longer continue to support the price of tin.
Russia produces 17% of the world’s finest nickel, and high nickel prices, if they persist, threaten to increase the costs of electric car batteries and complicate the energy transition that depends on the metal.
In an interview with Reuters, an analyst at OFI Asset Management Benjamin Louvet said that Russia is the third largest producer of nickel in the world.
“For now, the main producers of metals in the country have been spared by sanctions, but many companies in this sector are headed by oligarchs close to Vladimir Putin,” Louvet said.
“The impact of such sanctions could be significant, as 37 percent of Russian exports go to the Netherlands and 16 percent to Germany,” he said.
Nickel trimmed some gains to trade up 66% at $80,000 per ton before the suspension. Other metals fell on the London Metal Exchange after the announcement.
The London Metal Exchange said it was studying a possible closure for several days, given the geopolitical situation that forms the basis of recent price movements, according to Bloomberg.
It explained that it will calculate the prices of the requests “at the moment” on the basis of Monday’s closing price at about $48,000, and is considering whether to adjust or cancel the trades that took place when prices rose to 101,365 dollars per ton.
Nickel was already rising due to supply shortages even before the Russian invasion of Ukraine, which only heightened fears of an overwhelming shortage of basic commodities.