The LME Nickel Short That Broke an Exchange
On March 8, 2022, nickel doubled in hours to over 100,000 dollars a tonne. The London Metal Exchange halted the market, and then did the unthinkable: it canceled the morning's trades, about 12 billion dollars of them, to save its own members.
The Short Behind the Squeeze
Tsingshan Holding Group, the world\'s largest stainless steel and nickel producer, run by founder Xiang Guangda, a man nicknamed Big Shot in Chinese metals circles, had built an enormous short position in nickel futures, reportedly north of 150,000 tonnes spread across the London Metal Exchange and private bank deals. Part of it was standard producer hedging, locking in prices for future output. Part of it was a bet: Xiang believed nickel prices would fall as his company\'s huge new Indonesian supply came online. A producer hedging output it will actually deliver is safe. A short position bigger and different in form than your deliverable production is a directional trade, and it carries the short seller\'s eternal risk: losses have no ceiling.
War Meets a Crowded Trade
Russia\'s invasion of Ukraine in late February 2022 changed the arithmetic overnight. Russia\'s Norilsk was one of the world\'s key suppliers of the high grade class one nickel that the LME contract actually delivers, and sanctions fears sent prices climbing. On Monday, March 7, nickel jumped roughly two thirds to around 48,000 dollars a tonne, already an all time record, and the margin calls on shorts turned brutal. A margin call is the exchange\'s demand for cash as a losing position grows; fail to pay and your broker liquidates you, meaning it buys back your short, pushing the price higher still. Overnight into Tuesday, March 8, that loop went vertical. In a few hours of thin Asian trading, nickel doubled, blowing through 100,000 dollars a tonne, quadruple its level days earlier.
The Cancellation
At around 8 a.m. London time the LME suspended nickel trading, its first suspension of a metal since the tin crisis of 1985. Then came the decision that made history: the exchange canceled every nickel trade executed that morning, roughly 9,000 trades worth about 12 billion dollars, resetting the market to Monday\'s close. Its stated reason: the morning\'s prices would have generated 19.7 billion dollars of margin calls that several of its own clearing members, the firms that guarantee trades to the clearinghouse, could not have paid, threatening a cascade of defaults through the exchange itself. In the LME\'s framing, the market had become disorderly and canceling was within its rules. In its critics\' framing, the exchange, owned by Hong Kong Exchanges and Clearing, had torn up legitimate trades to rescue a giant Chinese client and its banks.
Every futures market rests on one promise: a trade, once done, is done. The nickel cancellation showed the fine print, that when enough leverage fails at once, the referee will change the score rather than let the game collapse. Markets have priced LME credibility differently ever since.
Winners Erased
Cancellation has no neutral outcome: every canceled trade had a winner. Hedge fund Elliott Associates, which had bought nickel into the spike, calculated it lost 456 million dollars of profit when its trades were erased. Trading firm Jane Street put its own loss around 15 million. Both sued. Meanwhile Tsingshan, the short whose distress the cancellation had relieved, negotiated a standstill with its banks, JPMorgan the largest among them, and ultimately unwound its position over months without default. The optics were terrible and the LME conceded as much in later reviews, though it maintained the alternative was systemic failure.
The Lawsuit
Elliott and Jane Street\'s judicial review, seeking roughly 472 million dollars combined, argued the LME had exceeded its powers and unlawfully favored some market users over others. In November 2023 London\'s High Court ruled comprehensively for the exchange: canceling the trades was lawful, rational, and within its rules given the systemic stakes. The Court of Appeal dismissed Elliott\'s appeal in 2024, and in January 2025 the UK Supreme Court refused permission for a final appeal, closing the case for good. The exchange won every round in court. What it lost was harder to litigate.
The Damage
Nickel trading volumes on the LME collapsed after the crisis and took years to recover, with pricing influence leaking toward Shanghai and private deals. The exchange imposed daily price limits across its metals for the first time in its history and overhauled its risk controls, and regulators sharpened rules on large position reporting in over the counter deals, where much of Tsingshan\'s short had hidden from view. In hindsight the episode reads as a stress test the plumbing failed: the squeeze was survivable, but only by breaking the market\'s most basic promise.
The Bottom Line
The nickel crisis packed every big trading lesson into 48 hours: shorts have unlimited downside, hedges that outgrow production become speculation, hidden OTC positions can blindside an entire market, and a clearinghouse\'s guarantee is only as strong as its members\' cash. Above all it taught that exchanges, in extremis, will choose survival over sanctity of trades. That knowledge now has a price, and every market that competes with the LME has been collecting it since March 2022.