Nickel briefly jumped by its 15% daily limit, as an unconfirmed report about a blast at a nickel plant in Indonesia sparked the biggest rally since a historic short squeeze in March.
Prices spiked by more than $4,000 a ton on the London Metal Exchange, before quickly paring gains. Traders and brokers said the move was sparked by a report in Chinese media about an explosion at a small nickel pig iron plant in Indonesia.
Cailian cited videos circulating on social networks and said there was a fire and blasting sounds at an Indonesian plant owned by CNGR Advanced Material Co. CNGR later said the plant has been operating normally since trial production started at the end of last month, and the report “deviates from the truth.”
Wild price swings in nickel have become common in recent months, after some users curbed trading in the wake of the LME’s controversial efforts to rein in the runaway short squeeze in March. Those illiquid trading conditions mean even small shifts in supply and demand can spark large price moves.
The move came in an otherwise mixed session for metals, as traders reacted to the LME’s announcement that it won’t block deliveries of Russian metal into its warehouses. The LME had been seeking views on banning Russian metal on the grounds that some manufacturers are refusing to accept it, but said late on Friday that discussions with the industry showed that self-sanctioning by consumers wasn’t sufficiently widespread to justify such a move.
Nickel trading has suffered from low liquidity since March’s short squeeze, which prompted the bourse to halt trading for a week, cancel billions of dollars of transactions and set daily limits on price moves. The market has become substantially more volatile since that squeeze, with daily moves of more than 5% seen frequently.
Monday’s rally also came amid thin trading conditions, with algorithmic investors known as commodity-trading advisers driving the move, according to Marex analyst Alastair Munro. Prices rallied 13% last week, putting pressure on traders who’ve been betting on a move lower.
“You had a market which was seeing shorts getting squeezed into the middle of last week,” Munro said. The market “remains very tight” in China, he added.
Nickel rose as high as $30,960 a ton, the highest intraday price since May, before paring gains to trade up 1.8% as of 2:12 p.m. on the LME.
In other base metals, aluminum fell 1.5% and copper dropped 1%, while zinc rose 2%.
(With assistance from Martin Ritchie and Chunying Zhang)
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