The war in Ukraine has sent shockwaves through the London Metal Exchange (LME), with the price of nickel surging to unprecedented levels and causing a crisis in the global industrial metals market.
The conflict in Ukraine, which Russia refers to as a “special operation”, has disrupted the supply chain of key metals, including aluminium, copper, and nickel. Russian metal exports are facing increasing financial and logistical challenges as more companies sever ties with the country.
The price of nickel skyrocketed by 61% to $48,078 per tonne on March 7, leading to a cascade of margin calls and potential defaults among LME brokers. The exchange was forced to suspend nickel trading due to what it called “a systemic risk to the market”.
The crisis has also impacted other metals traded on the LME, with zinc and lead reaching record highs before plummeting back to normal levels. The sudden volatility in the market has sparked concerns about the stability of the entire industrial metals sector.
The LME has imposed emergency measures, including backwardation limits and potential price bands, to address the crisis. The physical deliverability of the core metal contracts on the exchange has also raised concerns about potential supply disruptions.
As the conflict in Ukraine continues to unfold, the global metals market is facing uncertainty and volatility. The LME’s ability to resolve the crisis in the nickel market will be crucial in restoring stability to the industry.
For now, all eyes are on the LME as traders and investors navigate the turbulent waters of the industrial metals market amidst the ongoing crisis in Ukraine.
