The London Metal Exchange has found bags full of stones in one of its warehouses instead of nickels it was supposed to contain in the latest drama to hit the scandal-hit metals market.
The exchange said in a notice to the market on 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”. A person familiar with the matter said that the nickel goods were indeed full of stones.
The LME added that the irregularity in bagged nickel “was evident, inter alia, by the weight of the bags” and that it “reminds licensed warehouse operators of the strict requirement to weigh all metal before placing it” in warehouses.
The discovery comes just weeks after Trafigura, one of the world’s biggest metals traders, uncovered a $577mn nickel fraud that rocked the commodities industry.
The supposed nickel was stored in a warehouse in Rotterdam 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 acceptance of fake consignments into the LME’s system is a further blow to the 146-year-old exchange’s reputation following last year’s controversial decision to cancel nickel trading following a historic surge in prices, a move that has drawn regulatory scrutiny and lawsuits from investors. .
Following the discovery, the LME asked the warehouse operator to conduct an inspection, which found nine cases of missing nickel in 54 tons of material 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 placed a freezing order and taken legal action against Indian businessman Prateek Gupta for his alleged role in selling 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 issue “has nothing to do with Trafigura’s legal action against a group of companies linked to and apparently controlled by Pratik Gupta”.
The exchange declined to comment on whether the fake nickels in its warehouses were linked to the fraud released by Trafigura.
In a move to restore confidence in the nickel market following last year’s controversy, the LME was planning to reopen nickel trading during Asian hours on Monday, which has been closed since this time last year.
However, due to the risk of further detection of irregular nickel consignments in warehouses, the LME has suspended trading for a week during Asian hours.
