By Grant Mercer
In the early hours of Tuesday, March 8, 2022, the price of nickel did something no major industrial metal had ever done. On the London Metal Exchange, the benchmark contract for the metal that goes into stainless steel and electric-vehicle batteries spiked more than 250 percent in two sessions — from under $30,000 a tonne to over $100,000 — in a vertical ascent driven by a single concentrated short position colliding with a geopolitical shock and a tidal wave of margin calls.
Then the exchange did something even more extraordinary: it stopped the market, and erased the morning. Every trade executed after midnight — some eight hours of trading, representing billions of dollars of gains and losses — was cancelled, voided, as if it had never happened. Traders who had been up hundreds of millions woke to find their profits deleted by administrative fiat.
The nickel episode is the purest modern illustration of what happens when the market's plumbing — margin, clearing, and the exchange's own authority — becomes the story. It demonstrated that in a crisis, the clearinghouse's survival outranks every participant's P&L, and that the assumption every trader holds most deeply — that a winning trade is a won profit — is contingent on the exchange agreeing.
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What happened: the setup
The central figure in this story was Tsingshan Holding Group, the world's largest producer of nickel and stainless steel. Tsingshan had built an empire on a bold industrial bet: pioneering the production of nickel pig iron in Indonesia, dramatically expanding the global supply of nickel for stainless steel. By 2022, the company was a dominant physical force in the nickel market.
Alongside its physical dominance, Tsingshan had accumulated an enormous short position in nickel futures — reportedly on the order of 100,000 tonnes or more, held through LME contracts and over-the-counter positions with banks. The commercial logic was straightforward: as a massive producer, the company was naturally long physical nickel, and the short futures position was, in some sense, a hedge against falling prices. But the position's scale relative to LME inventories and deliverable supply made it something more dangerous: a concentrated short in a market where the physical metal available to deliver was limited.
The kindling was geopolitical. Russia's invasion of Ukraine on February 24, 2022, convulsed commodity markets across the board — but nickel was uniquely exposed. Russia accounted for roughly a tenth of global nickel supply, and the prospect of sanctions or export disruptions on Russian metal sent buyers scrambling. Nickel, already tight, began to rise.
The mechanism that turned a rally into an explosion was the margin call. As nickel prices climbed through early March, Tsingshan's short position generated mounting mark-to-market losses — and margin calls demanding cash collateral against those losses. To meet the calls, the company and its brokers needed to buy back nickel; that buying pushed prices higher; higher prices generated larger margin calls. It was the classic short squeeze, but at a scale the LME had never witnessed: a feedback loop between the price and the financing of the position, each turn more violent than the last.
On Monday, March 7, nickel rose more than 60 percent in a single session. Overnight into Tuesday, in thin Asian-hours trading, the squeeze went vertical — the price doubling again to above $100,000 a tonne. At those levels, the margin calls facing Tsingshan, its brokers, and the banks behind them ran into the billions of dollars. The question was no longer whether someone would lose money. It was whether the clearing system itself could survive the losses.
The mechanism: when the clearinghouse becomes the story
To understand what the LME did next, it is necessary to understand what a clearinghouse is. When two parties trade a futures contract on the LME, the exchange's clearinghouse steps between them, becoming the buyer to every seller and the seller to every buyer. This is the foundation of modern futures markets: participants never face each other's credit risk, because the clearinghouse guarantees every trade.
But the guarantee is only as strong as the clearinghouse's resources. Those resources come from margin — the collateral every participant posts — and, in extremis, from a "default waterfall": the defaulting member's margin, then its default-fund contribution, then other members' contributions, then the clearinghouse's own capital. If losses exceed all of these, the clearinghouse itself fails, and with it every contract it guarantees.
On the morning of March 8, the LME faced the prospect of exactly this cascade. The margin calls generated by the nickel spike were so large that multiple clearing members — the brokers through whom Tsingshan and others traded — might be unable to meet them. A member default in the midst of a disorderly market could have triggered the waterfall, and in the extreme, threatened the clearinghouse itself. The exchange's leadership concluded that the market had ceased to function in any orderly sense: prices were being set by forced buying in illiquid overnight trading, and the resulting margin obligations threatened the system's solvency.
So the LME took the most drastic action available to an exchange. Shortly after 8 a.m. London time, it suspended all nickel trading. And then it cancelled every nickel trade executed since midnight — roughly eight hours of trading, encompassing the entire vertical spike, with a reported value around $3.9 billion in voided transactions. The price was rolled back to the previous night's close, margin calls were recalculated on that basis, and the immediate threat to the clearing system was defused.
The logic was systemic: better to void billions in trades than to risk the clearinghouse. The cost was borne by everyone who had traded profitably during those eight hours — including participants with no connection to Tsingshan, who had simply bought nickel in a rising market and watched their gains erased by decree.
The warning signs
The nickel squeeze, like most plumbing failures, was visible in the market's infrastructure data before it detonated:
Inventory collapse. LME nickel warehouse stocks had been declining for months, falling to levels that covered only days of global consumption. A short squeeze requires scarcity of deliverable supply, and the inventory data showed the scarcity building in plain sight. Low stocks are the necessary condition for every delivery squeeze in history.
Concentration. The scale of the short position relative to open interest and deliverable stocks was the structural fact of the market. When one participant's position is large relative to the physical base, the market's price-discovery function is hostage to that participant's financing. Concentration statistics — the commitment of traders, warehouse stock movements, the anomalous calm before the storm — all pointed the same direction.
The geopolitical accelerant. The invasion of Ukraine did not create the vulnerability; it triggered it. But the trigger was foreseeable in type if not in timing: nickel's supply geography, with Russia's significant share, meant that any geopolitical disruption would hit this specific market hardest. Supply concentration by country is a standing risk factor in metals markets, and it was flashing red for weeks.
The Monday move. The 60-percent-plus surge on March 7 was itself the final warning — a move so far outside historical experience that it signaled forced buying rather than price discovery. When a market moves in a way that no fundamental can explain, the explanation is positioning and margin, and the only question is how far the feedback loop runs before something institutional intervenes.
The lessons
The clearinghouse's survival outranks your P&L. The LME's decision was not about fairness to any participant — it was about the solvency of the system. In a true plumbing crisis, the hierarchy is absolute: the clearinghouse first, the members second, and individual traders' profits a distant third. Professionals size positions with the understanding that systemic interventions redistribute losses by decree, not by market.
Executed is not final. The cancellation of eight hours of trades destroyed the assumption that once a trade prints, it exists. Exchange rulebooks universally reserve emergency powers — the LME's actions were within its stated authority — but few participants had internalized what those powers meant in practice. Reading the emergency provisions of a venue's rulebook is part of understanding the contract.
Short squeezes are financing events. The nickel spike is often described as a price event, but its engine was margin: the feedback loop between rising prices and cash collateral calls. Analyzing a squeeze means analyzing balance sheets, not just supply and demand — who must buy, how much cash they can raise, and what happens when they cannot. The price is the symptom; the financing is the disease.
Concentration plus leverage plus a trigger equals discontinuity. Every element of the nickel episode was visible beforehand: the concentrated short, the thin inventories, the geopolitical exposure. None of them alone would have produced a 250-percent spike. It was their combination — and the margin mechanism that linked them — that created the discontinuity. Risk analysis that examines factors in isolation misses the configurations that actually detonate.
The immediate crisis was contained through finance, not markets: Tsingshan's banks arranged credit facilities and a standstill agreement that allowed the company to meet its obligations without forced liquidation. But the institutional damage was profound. Elliott Management sued the LME for over $450 million, arguing that the trade cancellations were unlawful; other firms filed similar suits, and the UK's Financial Conduct Authority launched a review of the LME's actions. The LME responded with structural reform — for the first time in its history, it introduced daily price limits on its metals contracts, and it enhanced reporting requirements for over-the-counter positions, the blind spot that had hidden the full scale of Tsingshan's exposure.
The deeper consequence was a permanent repricing of exchange risk. Before March 2022, sophisticated participants treated executed trades on major exchanges as final — settlement risk was something that happened in emerging markets, not London. After the cancellations, every large trader had to incorporate a new variable: the probability that the exchange itself voids the trade. "A win is a win" became "a win is a win unless the venue disagrees" — a subtle change in wording that represents a profound change in the nature of market risk.
There is a substantial risk of loss in trading commodity futures and options products. Losses in excess of your initial investment may occur. Past performance is not necessarily indicative of future results.