Instead of nickels, the LME finds sacks of stones in the metal warehouse
The London Metal Exchange found bags full of stones in one of its warehouses instead of the nickels it was supposed to contain in the latest drama to hit the scandal-hit metals market.
In a statement issued to the market on Friday, the exchange said it had “received information that such irregularities have occurred in a number of physical nickel shipments from a specific facility of an LME-licensed warehouse operator.” The suspected nickel shipments were actually filled with stone, a person familiar with the matter said.
The LME added that irregularities in bagged nickel were “evident in the weight of the bags, among other things,” and “reminds licensed warehouse operators of the strict requirement that all metal be weighed before it is placed” in stock exchange-approved warehouses.
The discovery comes just weeks after Trafigura, one of the world’s biggest metals traders, uncovered a $577 million nickel fraud that rocked the commodities industry.
The suspected nickel was stored in a warehouse in Rotterdam operated by Access World, which until January was owned by Trafigura’s commodities 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 inclusion of the bogus shipment into the LME system is a further blow to the 146-year-old exchange’s reputation following last year’s controversial decision to cancel nickel trades after they triggered a historic price rise. .
Following the discovery, the LME asked the warehouse operator to carry out an investigation, which found nickel shortages in nine cases, 54 tonnes worth $1.3 million. The LME has ordered all its licensed warehouse operators to re-inspect nickel in storage to check for irregularities.
Trafigura announced last month that it had ordered a freeze and taken legal action against Indian businessman Prateek Gupta for his alleged role in the sale of more than 1,100 containers that were supposed to contain high-grade nickel but did not.
The Singapore-based company said in a statement that the case “is unrelated to Trafigura’s legal action against a group of companies linked to and apparently controlled by Prateek Gupta”.
The exchange declined to comment on whether the fake nickels in its warehouse were related to the fraud uncovered by Trafigura.
In an effort to restore confidence in the nickel market following last year’s controversy, the LME planned to reopen nickel trading, which has been closed since last year, on Monday during Asian hours.
However, with the risk of further irregular nickel shipments being discovered in warehouses, the LME delayed the reopening of trading in Asian hours by a week.