(Bloomberg) -- Nickel dropped by the maximum allowed for a third day in another glitchy opening for trading in London, as the price continues its retreat from an unprecedented short squeeze last week.
It was the third straight day that electronic trading in LME nickel had suffered from apparent glitches, as the LME has run into problems with its new trading limits, which were introduced for the first time in the wake of last week’s price runaway price spike.
Nickel dropped 12% to the daily limit of $36,915 a ton, although at least three trades went through at a price below the lower bound set by the exchange, according to Bloomberg data. The trades outside of the limit will be canceled, a spokesperson for the LME said.
While the continued snafus will be frustrating for traders, Friday’s drop is the latest sign that the massive short squeeze in nickel that roiled the metals industry last week is easing following a controversial series of interventions by the exchange.
Prices had spiraled up 250% in a little more than 24 hours early last week as top producer Tsingshan Group Holding Co. struggled to pay margin calls on its large nickel short position. The Chinese company announced a deal with its banks on Monday to avoid margin calls, which gave the LME confidence to reopen the market, and most traders and analysts had predicted prices would fall when trading resumed.
Still, while the nickel price has plunged since reopening on Wednesday after a week-long suspension, there has hardly been any trading. Friday’s price of $36,915 is 23% below the closing price on March 7, and 64% below the all-time high of $101,365 touched on the morning of Tuesday March 8 in trades that were later canceled by the LME.
On Friday, little volume traded even at the limit-down price. By 8:17 a.m., just over 100 lots had traded, equivalent to 600 tons of nickel. There were still vast orders to sell at the limit-down price, but no willing buyers. Bloomberg data showed sell orders for 11,000 lots, or 66,000 tons of nickel, and no bids as of Friday morning.
The successive limit-down drops this week have brought London prices within touching distance of futures in Shanghai, which continued to trade during the LME suspension. The most liquid April contract in Shanghai traded at about $34,500 a ton on Friday, or $30,500 a ton on a comparable basis to the LME (that is, excluding tax).
The LME announced late Thursday it would widen the limit to 12%. Nickel started trading on Wednesday at a 5% limit, which was increased to 8% a day later.
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