Nickel spikes 90pc as supply fears trigger wild short squeeze

The price of nickel traded in London rocketed as much as 90 per cent to a record high as fears of a Russian supply shock left buyers of its high-quality output exposed to a short-term squeeze in one of the wildest sessions in living memory.The metal, which is a key component in lithium-ion batteries and stainless steel, leapt to nearly $US55,000 a tonne, surging past the previous record of $US51,800 reached in 2007. It settled at $US50,925 a tonne, up 76 per cent, marking the largest single day gain for nickel in the three-month LME contract’s history.

The explosive move was triggered by reports that holders of Russian metal physically stored in LME warehouses had relinquished their holdings, causing liquidity to swiftly deteriorate as sellers rushed to the sidelines. This forced investors with short positions to buy back positions, adding to the mood of chaos.A unit of China Construction Bank, called CCBI Global Markets, missed paying hundreds of millions of dollars of margin calls on Monday amid the frenzy. The LME provided it with additional time to make the payments, meaning it is not formally in default, Bloomberg reported.“It’s an unprecedented move – it equates to a 30 deviation point move, which is virtually unheard of, even in the nickel market which is traditionally volatile,” said Daniel Hynes, senior commodity strategist at ANZ.

ASX nickel miners were mostly unmoved on Tuesday because of the lag between when nickel concentrate is shipped, and when the final shipment price is settled a few weeks later, depending on contract terms.Generally, concentrate is not sold on a daily spot rate but based on monthly averages, meaning prices need to remain elevated for a more sustained period to have a meaningful effect on producer revenue.