Elliott Sues LME for $456 Million Over Nickel Fiasco
2022.06.06 16:11
By Geoffrey Smith
Investing.com — The London Metals Exchange is facing a claim for over $450 million in damages for its role in the sharp spike in nickel futures prices earlier in the year.
Hedge fund Elliott Management is seeking $456 million after being denied profits on trades that it made before the price of its benchmark nickel contract surged in March, after western sanctions on Russia in response to the Kremlin’s invasion of Ukraine cast doubt over the reliability of Russian supplies to the world market.
The surge wrong-footed one of the world’s biggest nickel producers, China-based Tsingshan Holding Group, which had paradoxically amassed a huge bet on nickel prices falling, a position that far outstripped the group’s usual hedging operations.
Tsingshan had had to cover its short position at ever more extreme prices until the LME suspended trade, citing “disorderly” market conditions, with the contract trading at over $100,000 a ton. That led to accusations from those who were long the contract that the exchange had bailed out selected participants at the expense of others.
U.K. financial regulators are now investigating the episode.
The LME’s owner, Hong Kong exchange operator HKEX, was accused by more than one party of showing national bias, owing to the nationality of Tsingshan and its owner, Xiang Guangda. The exchange owner has rejected the criticisms as unfounded and said in a statement on Monday that it considers Elliott’s suit without merit.
