The Nickel Shock: How the Green Transition and Dangerous Bets Exposed Fragilities in Commodity Markets

Siddhant Mathur

Mr Matthew Chamberlain was exhausted.

Perhaps it was from the wild yells of panicked traders on the floor, or the frantic market monitoring he was doing since waking up at 05:00. Weary-eyed, the CEO of the London Metal Exchange (LME) issued an announcement unprecedented in its 145-year history.

A shutdown.

At 8.15 am, he announced a complete shutdown of nickel trading, cancelling all trades of the previous day. In the span of just two days, the price of nickel had skyrocketed to $101,000 from $23,500 earlier in the year, with a $30,000 increase in only 18 minutes. This drastic change brought significant losses for traders, a near complete wipe-out of the LME's Clearing House, and threatened the insolvency of the LME itself.

This is a story of evolving markets, big bets gone wrong, and near-total financial catastrophe.

Back to basics

To understand this squeeze, it is crucial to understand the metals trade. Metals are traded like stocks on a trading floor, with exchanges like Britain's LME estimated to facilitate $85bn in daily traded value - enough to give $10,000 to roughly the entire population of New York City.

There are two key types of markets to understand. A spot market allows traders to buy or sell a commodity at its current price, profiting by going 'long' - buying now to sell later at a higher price - 'short selling' - borrowing and immediately selling to buy back cheaper if the price falls. A futures market involves contracts granting the right to trade a commodity at a locked-in price on a future date. For example, a $5 contract might entitle a trader to sell nickel at today's price of $20,000 in three months; if the price drops to $10,000, they pocket $9,995. A key advantage of futures contracts is that if the market moves against you, you lose only the contract's nominal cost rather than the full spot market loss.

Setting the stage for collapse

Historically, nickel was used for 'hedging' - traders connected to large-scale nickel manufacturers would offset risk from other assets by purchasing nickel short futures, locking in a selling price before an expected price drop.

Figure 1: Data from: https://www.westmetall.com/en/markdaten.php?action=averages&field=LME_Ni_cash#y2016

1: Hertz-Tesla Deal

2: Start of Russia-Ukraine War

3: March 2022 LME Nickel Crisis

However, demand for nickel has grown strongly in recent years due to the rapid growth of the electric vehicle (EV) market, with nickel serving as a key component in battery production. This is reflected in rising LME futures prices following Hertz's announcement to acquire 100,000 Tesla vehicles for a large EV rental fleet. Nickel is also widely used in stainless steel production, improving toughness, ductility and corrosion resistance. These factors have driven prices upward rather than downward, transforming nickel from a safe hedge into a strategic asset increasingly influenced by speculation.

'Mr Big-Shot': How Excess Risk Seeped Into The Nickel Market

Enter stage-left, Xiang Guangda.

Responding swiftly to Indonesia's 2020 nickel export ban, Tsingshan Holdings' billionaire CEO expanded his firm's local manufacturing and refining facilities, capitalising on Indonesia's rise to become the world's largest nickel exporter with a 60% share of the global market. The substantial returns earned him the nickname "Mr Big-Shot" on the trading floor, with profits reinvested to grow his position further.

Anticipating a drop in nickel prices due to increased Indonesian production, Guangda short-sold nickel both through the LME and via private OTC contracts with banks like JP Morgan and Standard Chartered, concealing the true scale of his position from regulators. The banks, in turn, hedged their own exposure by betting against nickel on the LME, paradoxically amplifying market risk and piling further downward pressure on an already strained market.

As Russian troops crossed the Ukrainian border, the market went haywire.

The Crisis

When Russia invaded Ukraine, investors feared that Russian nickel supply would fall, driving prices up rather than down as Guangda and the banks had expected. This led to significant losses, since they now had to buy back nickel at a higher price than they had sold, or absorb losses from unwinding futures contracts. These losses were exacerbated by margin calls.

A margin call occurs when an investor who has borrowed money to fund a trade sees their position fall below the broker's required margin threshold - for example, if a broker funds half of a $5,000 short position with a 25% margin requirement, the investor must top up their account if the position's value drops below $1,250, or the broker will forcibly close the trade at a loss.

Widespread margin calls for both Tsingshan Holdings and the banks triggered a 'death spiral': investors unable to meet calls faced forced position closures, requiring them to buy back nickel and pushing prices higher still. This triggered further margin calls, and the cycle repeated. Prices spiralled out of control as investors panic-bought nickel, seeking to recover their losses.

When The Music Stopped: The LME Shutdown

The spiralling nickel market posed serious threats to the LME and broader financial system. As margin calls grew, 12 of the LME's 45 Clearing House members faced the threat of default, risking a collapse of metals trading in London. The LME shut down nickel trading and cancelled all trades from the previous day, effectively winding back the clock to pre-crisis prices and voiding $12bn in trades.

This did not come without controversy. The shutdown effectively bailed out Tsingshan Holdings and its banking partners, shielding them from serious consequences despite having concealed substantial risk through OTC contracts. Though Guangda suffered losses in the billions, his Indonesian operations provided a means of recovery, raising broader concerns about market manipulation and the moral hazard of protecting reckless actors at the exchange's expense.

The LME's decision to cancel trades led to lawsuits from Jane Street and Elliott Associates, claiming losses of $15.34m and $456.4m respectively, though the LME ultimately won both cases. Despite the legal victory, the exchange's reputation was severely damaged, with independent investigations by the Bank of England and FCA exposing significant weaknesses in its ability to handle market stress and management decision-making.

What can we learn?

The 2022 LME Nickel Crisis demonstrated how flawed market design and evolving dynamics can fuel instability, with Tsingshan Holdings exploiting OTC contracts to obscure risk while large banks underestimated their exposure as nickel transitioned from a hedging tool to a strategic asset. The LME and investors' failure to prepare for black swan events, despite prior warnings, meant that the Russian invasion of Ukraine sent nickel prices spiralling out of control, triggering massive losses and nearly bringing down the exchange entirely.

References

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Farchy, Jack. "The LME Nickel Crisis with Jack Farchy." The HC Insider Podcast, Episode 138. Hosted by Paul Chapman. HC Group, March 8, 2023. https://www.hcgroup.global/insights/hc-insider-podcast/the-lme-nickel-crisis-with-jack-farchy.
Forcellese, Lavinia. "How Indonesia Drove a Rally in Nickel." Goldman Sachs Insights, February 18, 2026. https://www.goldmansachs.com/insights/articles/how-indonesia-drove-a-rally-in-nickel.
Gaffney, Andrew. "How Indonesia Is Shaping the Nickel Market." Micromine Blog, February 6, 2025. https://www.micromine.com/blog-how-indonesia-is-shaping-the-nickel-market/.
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Ridley, Kirstin, and Eric Onstad. "LME CEO Urged Nickel Trading Halt Minutes after Waking Up — Court Document." Reuters, March 10, 2023. https://www.reuters.com/markets/commodities/lme-ceo-urged-nickel-trading-halt-minutes-after-waking-up-court-document-2023-03-10/.
Taylor, Brian. "LME Nickel Price Rise, Trading Halt Raise March 2022 Recycling Concerns." Recycling Today, March 2022. https://www.recyclingtoday.com/news/lme-nickel-price-rise-trading-halt-march-2022-recycling-concerns/.
Trading Economics. "Nickel Commodity Price." Accessed March 1, 2026. https://tradingeconomics.com/commodity/nickel.
Trytten, Lyle. "Nickel Industry Part 5: Forty Years of Change in the Nickel Industry." Nickel Institute Blog, December 2025. https://nickelinstitute.org/en/blog/2025/december/nickel-industry-part-5-forty-years-of-change-in-the-nickel-industry.
Westmetall. "LME Nickel Cash: Monthly Average Prices." Accessed March 1, 2026. https://www.westmetall.com/en/markdaten.php?action=averages&field=LME_Ni_cash.

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