LME finds bags of stones instead of nickel in a metal warehouse

The London Metal Exchange has found bags full of rocks in one of its warehouses instead of the nickel they were said to contain in the latest drama to hit the scandal-ridden metals market.

The exchange said in a notice to market Friday that it had “received information that a number of physical nickel shipments, from a specific facility of an LME-licensed warehouse operator, are subject to such irregularities.” The supposed nickel shipments were actually filled with rock, a person familiar with the matter said.

The LME added that the irregularities in the bagged nickel were “obvious, including due to the weight of the bags” and that it “reminds licensed warehouse operators of the strict requirement to weigh all metal before placing” in the warehouses approved by the exchange.

The discovery comes just weeks after Trafigura, one of the world’s largest metals traders, exposed a $577 million nickel fraud that has rocked the commodities industry.

The suspected nickel was stored in Rotterdam in a warehouse operated by Access World, which until January was owned by Trafigura’s commodity trading rival, Glencore, according to a person familiar with the matter.

Glencore declined to comment. Access World did not respond to a request for comment.

The adoption of the bogus shipment into the LME system is another blow to the reputation of the 146-year-old exchange after last year’s controversial decision to cancel trading in nickel following a historic rise in prices, a move that prompted regulatory investigations. and litigation from investors.

Following the discovery, the LME asked the warehouse manager to conduct an inspection, which found nine cases of missing nickel, amounting to 54 tons of material worth $1.3 million. The LME has ordered all of its licensed warehouse operators to repeat inspections on nickel in storage to check for irregularities.

Trafigura announced last month that it has issued a freeze order and legal action against Indian businessman Prateek Gupta for his alleged role in selling more than 1,100 containers that allegedly contained high-grade nickel, but did not.

The Singapore-based company said in a statement that the matter is “unrelated to Trafigura’s legal action against a group of companies associated with and apparently controlled by Prateek Gupta”.

The exchange declined to comment on whether the fake nickel in the warehouse was related to the fraud discovered by Trafigura.

In an effort to restore confidence in the nickel market in the wake of last year’s controversy, the LME planned to reopen nickel trading on Monday during Asian hours, which had been closed around this time since last year.

However, due to the risk of further discoveries of irregular nickel shipments in warehouses, the LME has postponed the reopening of trading during Asian hours by a week.

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