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LME expands nickel trading daily price limit to 8% after resumption

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LME expands nickel trading daily price limit to 8% after resumption


Nickel limit likely to reach 15% as situation normalizes

Three-month price already hit 8% lower limit at 0845 GMT

LME did not publish March 16 closing price for nickel

  • Author
  • Jacqueline Holman
  • Editor
  • Manish Parashar
  • Commodity
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  • Nickel
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  • Battery Metals

The London Metal Exchange has widened the daily upper and lower price limits for nickel trading to 8% from 5% from March 17, it said late-March 16.

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The LME did not provide a reason for the limit increase, but said it would be reviewing the appropriateness of the daily price limits and could, subject to prevailing market conditions, adjust them.

"Subject to ongoing monitoring, the LME's expectation is that nickel price limits will reach the 15% level employed for other base metals, as the market situation normalizes," the LME said.

It had said in an earlier announcement that it was assessing whether it could widen the nickel daily price limit for March 17 to "further assist the market to discover the true market price," adding that this would allow "a resumption of prices in a smaller number of days, while ensuring that trading continues to remain orderly."

The move to the higher limit had some glitches, with a LME spokesperson telling S&P Global Commodity Insights that some nickel orders could not be entered during the 0730-0800 GMT preopen period in LMEselect and to ensure a fair time priority of orders, the LME decided to repeat the preopen period during 0815-0845 GMT, with nickel trading on LMEselect delayed to start at 0845 rather than 0800 GMT.

"All venues are operating as normal now," the spokesperson said.

According to live data, the LME three-month nickel prices last traded at $41,945/mt at 0846 GMT, which was already at the new 8% daily limit. The last price on March 16 was $45,590/mt, down 5% from the March 7 close, according to the LME website.

The increase in the daily limit follows the resumption of nickel trading at 0800 GMT March 16 after it was suspended on 0815 GMT March 8.

Related story: Chinese nickel sulfate prices fall as LME resumes nickel trading

The resumption was not a smooth one, however, with the LME having to suspend nickel trading again shortly due to a systems error that allowed a small number of trades below the new daily price limit of 5% on its LMEselect electronic market.

It noted that once trading had resumed at 0800 March 16, the three-month nickel price immediately fell 5% on LMEselect, resulting in the halt.

Trading was then resumed at 1400 GMT March 16 and trading functioned normally throughout the rest of the day.

However, the exchange later confirmed that it would not be publishing a closing price for nickel, as the nickel closing prices had traded down to the preset 5% daily price limit on LMEselect, which meant that a "disruption event" had occurred.

In accordance with broader industry discussions and a previous announcement, the LME said this meant it would not publish closing prices as users preferred not to have closing prices that they had been unable to trade.

"As already discussed with the market, a natural consequence of the setting of the daily price limits is a constraint on the LME's ability to value carries where the outright legs have reached their limits," the LME said.

It gave the example that if both the cash and three-month nickel prices were subject to the 5% daily down price limit, this would constrain the valuation of the cash to three-month nickel carry, even if the carry had been trading at wider levels during the day, which was "an inevitable consequence of the LME's date structure."

The LME three-month spot nickel price reached an all-time high of $101,365/mt in early trading March 8, after closing at $48,078/mt on March 7. It had dropped back to $80,000/mt as of 0815 GMT on March 8 when the suspension took effect.

The LME said late-March 14 that the suspension had taken place "against the backdrop of widely reported large short positions [originating primarily from the OTC market], combined with geopolitical news-flow and a background environment of low metal stocks."

Since then, the LME has been working with stakeholders to assess market conditions and the conditions for resuming trading.