London Metal Exchange (LME) has announced that it is placing daily price limits of 15% on all metals in addition to an independent review of the events that caused the chaos in the nickel market last month to avoid the same situation.
The exchange suspended nickel trading on 8 March after prices rose more than 50 per cent to $100,000 a tonne. Trading resumed on 16 March when it launched daily price limits and the provision of OTC nickel trading data for the first time.
This rise was triggered by the conflict between Russia and Ukraine, as Russia is one of the world’s largest exporters of this volatile material.
The rise was attributed to short covering by Chinese producer Tsingshan Holding Group. According to the LME, these short positions originated in the over-the-counter market.
The LME has applauded the move by UK regulators to conduct a review of the actions taken by the London market in response to these events.
They state that the decision has been taken on all their physically delivered metals to provide an additional mechanism for stability in the market.
They added that, although historically, intraday price limits have not been a feature of LME markets, and market participants have preferred not to have such controls, there is now broad support for maintaining daily price limits for the foreseeable future to provide clear price limits and minimise the potential for disorderly price movements.
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