LME tightens lending rules for nickel

The London Metal Exchange on Wednesday introduced stiffer lending rules for nickel to curb speculation in the wake of the current tightness in supply. The new rules will come into effect today.

"The special committee has decided to modify lending guidance in respect of nickel by introducing new levels at which the holder(s) of dominant long positions (each holding 25 per cent or more) are required to lend nickel," the exchange said in a release.

According to the new norms, if at any time two members or clients hold 25 per cent or more of the warrants on nickel stocks each, both should be ready to lend "" at no more than 0.25 per cent of the cash price "" to reduce their position below 25 per cent.

If there are three position holders of 25 per cent or more each, the members will have to lend, if asked, at a premium of 0.5 per cent of the cash price for a day to reduce holding position below 16.66 per cent.

If there are four position holders with 25 per cent or more each, the member will have to lend, if asked, at a premium of 0.5 per cent of the cash price of a day reduce the position below 12.5 per cent.

For five position holders of 25 per cent or more each, the members should be prepared to lend at a premium of 0.5 per cent of the cash price of a day to reduce its position below 10 per cent. Nickel prices on the LME have more than doubled over the past one year on speculative buying amid critically low inventory levels at the exchange-monitored warehouses.

The benchmark three-month LME nickel contract had touched an all-time high of $51,800 a tonne May 9 as inventories at the world's largest metal exchange was only sufficient to met about two days' global demand.