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 room
The position started as a simple-payoff hedge with assumed thin tails, but hidden OTC leverage and a forced short-covering spiral produced a two-day, 250% discontinuous move and an unwind decision outside any model's contemplation, the signature of Q4, where complexity and fat tails combine to break the risk machinery itself.
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
The book
This entry is one of 111 in the register. The full story, and what it cost the people who lived it, is in Risky Business by Claudia Zeisberger, David Munro and Joanna Reijgersberg-Siew.
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