A nickel-trading fiasco raises three big questions

THE TRADINGLMELMELMELMELME of commodities is an arcane activity that makes it into the public eye only at times of extreme hubris. That is when names like the Hunt brothers, who tried to corner the silver market in 1980, and Hamanaka Yasuo, or “Mr Copper”, who in 1996 produced huge losses for Sumitomo, a Japanese trading house, became household ones. Xiang Guangda, a Chinese tycoon known as “Big Shot”, vaulted into the news this month by taking a position on nickel that went badly wrong. The result has been one of the biggest tremors in the 145-year history of the London Metal Exchange (). It has also brought China, which is keen to exert more power over the trading of commodities, face to face with free markets gone mad.In the cloistered world of the , some facts about the affair are clear. One is that nickel prices, already hot before Russia’s invasion of Ukraine, surged after the West imposed sanctions on Russia. Another is that Mr Xiang’s firm, Tsingshan, had exposure to short positions on the of about 180,000 tonnes of nickel, which were supposed to benefit if prices went down. They didn’t, as a short-covering scramble for nickel briefly pushed prices above $100,000 a tonne on March 8th, putting Tsingshan’s potential losses into the billions of dollars. At that point the suspended nickel trading, cancelling all trades that took place overnight. When the suspension was lifted on March 16th, a sharp drop in nickel prices forced the to suspend trading again, adding to the chaos.