By Pratima Desai and Clara Denina
LONDON -Britain’s Financial Conduct Authority (FCA) and the Bank of England are talking to the London Metal Exchange about the resumption of a fair and orderly market in nickel, the FCA said on Monday.
The LME was forced to halt nickel trading and cancel trades after prices doubled on Tuesday, March 8, to more than $100,000 per tonne after China’s Tsingshan Holding Group bought large amounts to reduce its short positions in the metal.
“As a regulated investment exchange, the LME is responsible for the maintenance of fair and orderly markets,” the FCA said in response to a Reuters request for comment.
“This may include taking steps such as a temporary suspension of trading at times of extreme price volatility.”
The LME also deferred physical delivery of maturing contracts and announced it would temporarily stop publishing official and closing nickel prices.
But the unprecedented measures have drawn the ire of nickel producers and traders who rely on LME prices of the metal used to make stainless steel and electric vehicle batteries.
“The lack of knowledge on the full extent of the crisis-at-hand, nor the timeline for the LME’s resumption of trading, are creating major financial and reputational repercussions,” said Pierre Gratton, president of the The Mining Association of Canada (MAC), in a letter to the LME seen by Reuters on Monday.
“The longer that this suspension remains in place, and without a clear, publicly communicated action plan, the more demand destruction for nickel.”
The LME had anticipated nickel trading would restart on Friday, but the criteria for restarting had not then been met.
MAC members include major mining companies such as BHP Group and Vale. Canada accounts for 6% of global nickel production.
Tsingshan said on Monday it has reached an agreement with lenders under which they will not make margin calls on or close out the producer’s nickel positions on the LME.
The FCA regulates the trading activities of the London Metal Exchange (LME) as a UK Recognised Investment Exchange and the Bank of England regulates the clearing activities of LME Clear as a Recognised UK Central Counterparty.
(Reporting by Pratima Desai and Clara Denina; Editing by Hugh Lawson and Emelia Sithole-Matarise)
