By Geoffrey Smith
Investing.com — The world’s benchmark oil market suspended trading on Tuesday after a wild few hours in which prices more than tripled to above $100,000 a ton.
The took the rare step of saying it would consider whether to reverse or adjust trades made during the frenzied period following Monday’s official close, when a violent compression of positions short took prices to more than twice their previous all-time high, set 15 years ago. After peaking at $101,365 a tonne, the benchmark contract was trading at $81,051 when it was suspended.
The incident is the latest sign of mounting stress in financial markets around the world following US and European sanctions against Russia, which were imposed after Russia invaded Ukraine in late February. As with nickel, natural gas and wheat, Russia is one of the world’s largest sources of nickel, accounting for some 17% of global supply, and any attempt to restrict its exports must have serious consequences on the market. global market.
Nickel is most often used in stainless steel manufactured for the automotive, appliance and construction industries. However, the additional demand comes mainly from the electric vehicle sector, for which it is an important material for batteries. Rystad Energy analysts expect widespread electric mobility to boost global nickel demand by more than 35% to 3.4 million tonnes by 2025, from around 2.5 million tonnes Last year. The average Tesla (NASDAQ:) car contains about 45 kilograms (99 pounds) of this metal.
Growing demand from EV makers had already drained LME stocks last year, and they are now at their lowest level since 2019.
Various reports have attributed the price surge to the growing desperation of Chinese participants to cover their short positions. China Construction Bank (OTC:), one of the country’s largest state-owned banks, was given extra time on Monday to respond to a margin call it missed earlier. Reports suggest the position was ultimately held by Tsingshan Holding Group Co, China’s largest nickel producer.
The Financial Times quoted the company as allegedly telling a local Chinese news agency that it had “already held a meeting this morning, was sorting through relevant documents and content and would make a response. public in due time”.
Tsingshan’s website was not functioning at the time of publication.
The surge also dealt a blow to all other brokers holding short positions as a hedge for their day-to-day business. The LME said it would calculate margin calls based on Monday’s closing price of around $48,000 a tonne.
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