THE NIGHT THE NICKEL MARKET BROKE

How the LME sleepwalked into a crisis, unaware of a massive short squeeze centered around metals giant Tsingshan

Matthew Chamberlain had just presided over one of the wildest days in the history of metals markets when he sat down to type a late-night memo to the UK’s financial regulator. But the chief executive of the London Metal Exchange (LME) was optimistic. It was the evening of 7 March last year and nickel prices had surged as much as 90% to an unprecedented $55,000 a ton, causing huge strains across the market. A large Chinese bank had missed a margin call in the hundreds of millions of dollars. The Financial Conduct Authority (FCA) was beginning to demand updates.

Now, after a long day of meetings, calls and emails, Chamberlain summed up the LME’s position: the price spikes were explainable because of jitters over Russia’s invasion of Ukraine, and the market was still functioning. It didn’t see a need to intervene.

“We will see where we stand 0800-0900 tomorrow," Chamberlain wrote. “If the nickel price has fallen overnight, we’ll be in a much better position." At 9:36 pm, he pressed send. By the time he woke up at 5:30 am, the market was in chaos.

The broad outlines of what happened in the nickel market last year are by now well known. Prices did start rising because of worries over Russian supply, but by the time of Chamberlain’s memo the nickel market was in the grips of a violent squeeze centered around a short position built by Xiang Guangda of Tsingshan Holding Group Co., the world’s top nickel and stainless steel producer. A few hours after Chamberlain woke up, the LME announced it was cancelling all nickel trades that had taken place on 8 March.

Now, documents made public in a court hearing this week recount in unforgiving detail the LME’s fateful decisions in early March, and how it sleepwalked into a crisis with little precedent in the modern history of finance.