LME fines warehouse that stored fake nickel for 2022 mishap

The London Metal Exchange has fined warehouse operator Access World £60,000 ($77,316) for erroneously loading out nickel from a depot in Rotterdam in 2022, five months before the discovery that some of the metal it was holding for clients was fake.

Staff at Access World loaded out 24 tons of nickel cathodes from the warehouse between Oct. 18 and Nov. 16, 2022, apparently due to human error, the LME said in a notice on Tuesday. The LME said it was only notified of the outflows on March 14, 2023, after the warehouse operator commissioned a third party to carry out an audit of the metal it was storing on behalf of clients.

Soon after — on March 17 — the LME sent shockwaves through the global metals market when it announced that it had discovered that several cargoes underpinning its nickel contracts were in fact bags of stones. Bloomberg later reported that the cargoes were stored in an Access World facility in Rotterdam, and belonged to JPMorgan Chase & Co.

While the metals industry has suffered several-high profile frauds and thefts, the discovery rattled traders who view the LME’s warehousing system as the one place where metal is unquestionably safe. The exchange responded by carrying out a worldwide audit of the nickel underpinning its contracts, and later tightened rules covering handling and inspection of cargoes.

As it announced the fine on Tuesday, the LME said that Access World had been cooperative with the investigation into the incident, and had taken remedial steps to minimize the risk of a recurrence.

Its investigation also examined Access World’s storage controls, and the LME found them to be “at the relevant time, comparable to peers and reasonable.”

A spokesperson for the LME declined to comment on whether there was a connection between the erroneous load-out of metal and the discovery of the bags of stones.

(By Mark Burton)