Risk register · entry
Q4 · Where models dieLME nickel squeeze
Nickel spiked 270% in two days; the exchange cancelled the trades.
The world stops matching the model. Regime change and leverage turn a small error fatal.
Why this quadrant
Tsingshan's short was a producer hedge, the least exotic trade in the metal. Four fifths of it sat in OTC swaps the exchange could not see, so the LME was setting margin against a position whose size it did not know. Nickel went from about 29,000 to over 100,000 dollars a tonne in two days, and the exchange cancelled the morning's trades rather than let its members fail.
The record
- Nickel price rose from about $29,000/ton to over $100,000/ton in roughly two days (March 7-8, 2022), a move of about 250%certain
- LME suspended all nickel trading on March 8, 2022 and cancelled trades executed that morningcertain
- Value of cancelled trades: approximately $3.9 billion (some reports cite gross exposure up to $12 billion)likely
- Tsingshan's true short position exceeded 150,000 tonnes, with roughly four-fifths held via OTC swaps invisible to the LMElikely
- Tsingshan's paper losses reached an estimated $8 billion at the peak before trades were cancelledlikely
- Hypothetical margin calls the LME would have needed from 28 banks/brokers on March 8 totaled about $19.75 billionuncertain
- Elliott Associates sued the LME for roughly $456-472 million; Jane Street sued for about $15.3 millioncertain
- UK High Court ruled in the LME's favor on the trade-cancellation claims in 2023certain
- UK FCA fined the LME £9.25 million (about $11.9 million) in March 2025 for MiFID II control failures during the crisiscertain
Sources
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