Small earthquake in the global commodity market. The London Metal Exchange (London Metal Exchange), one of the institutions on which world trade in raw materials revolves, has discovered irregularities in one of the warehouses in which it has subcontracted the custody of the physical merchandise that supports the contracts that are crossed daily on its trading platforms.
The irregularity has affected the bags corresponding to nine nickel contracts in facilities located in Rotterdam, which are equivalent to some 54 tons of merchandise and valued at 1.3 million dollars, equivalent to about 1.4 million euros. When they were opened for verification, they found that they “did not comply with the contract specifications”, LME reported in a release. According to the Bloomberg news agency, sources familiar with the case have assured that inside those bags there were stones instead of nickel.
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Although the amount of metal affected represents only 0.14% of the stock with which the LME supports its nickel operations, this incident adds fuel to the fire to the controversy that has recently plagued this market. The news comes weeks after commodities broker Trafigura Group revealed that had been the victim of an alleged fraud involving lost nickel shipments. The company faces losses of $577 million. In addition, the LME is subject to an investigation by the regulator (the Financial Conduct Authority, whose acronym in English is FCA), after the so-called nickel crisis last year, which forced the cancellation of billions of euros in contracts on this metal, after its price doubled in just a few hours.
LME ordered the inspection after some of its customers reported that they had received fraudulent nickel shipments, all of them coming from the same warehouse, managed by the company. Access Worldpreviously owned by the commodity broker Glencorebut since January owned by Global Capital Merchants. After requesting an inspection, they detected these irregularities in a certain number of bags of nickel briquettes, which, according to the company’s own account, were identified by the great difference between their real weight and the weight that would have corresponded to them.
Nickel briquettes are small bricks of metal, with a purity between 99.8% and 100%, with a standard size of 40x30x18 mm and a weight of 70 grams each. They are used to get Nickel sulphatea key element to manufacture batteries for electric cars.
Ismael Morales
Although LME has assured that “it has no reason to believe” that irregular shipments may exist in other warehouses, has ordered all its subcontracted companies to carry out an inspection of the merchandise. The company has also ensured that this type of fraud (stones instead of metal) is only possible in this type of nickel contracts, since the rest of the metals are not stored in bags.
Financial contracts on industrial metals are usually backed by physical stocks of the material. The LME is the reference market for pricing and trading many of these metals, such as aluminum, copper and nickel. Any operator who has a valid contract has the right to collect the amount indicated in one of his warehouses.
Small earthquake in the global commodity market. The London Metal Exchange (London Metal Exchange), one of the institutions on which world trade in raw materials revolves, has discovered irregularities in one of the warehouses in which it has subcontracted the custody of the physical merchandise that supports the contracts that are crossed daily on its trading platforms.
