The London Metal Exchange has yet another embarrassing scandal on its hands: this time, the exchange discovered that bags which were supposed to be filled with nickel were instead full of stones.
In a statement to the market distributed on Friday, the LME unveiled it had received “information that a number of physical nickel shipments, out of one specific facility of an LME-licensed warehouse operator, have been subject to such irregularities.” A person familiar with the matter told the Financial Times that the nickel consignments actually contained stone rather than the metal.
The exchange explained that the irregularities were quite obvious “by the weight of the bags,” reminding licensed warehouse operators of the strict requirement to weigh all metal before it is placed into the LME’s warehouses. In light of the discovery, the LME then discovered that nine cases worth of nickel were missing, totaling around 54 tonnes of the metal worth $1.3 million.
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Separately, metal trader Trafigura several weeks ago uncovered that $577 million worth of nickel also went missing. The metal was supposed to be stored in a Rotterdam storage facility overlooked by Access World, which was previously owned by Trafigura’s rival Glencore up until the new year, wrote the Financial Times. The metals trader subsequently accused businessman Prateek Gupta of selling over 1,100 empty containers that were supposed to be filled with high-grade nickel.
The LME, for its part, refrained from linking the Trafigura incident with the fraud uncovered at its warehouse. The embarrassing discovery marks yet another reputation blow for the 146 year-old metal exchange, after it controversially halted nickel trades last year in light of an unprecedented surge in commodity prices.
Information for this briefing was found via the Financial Times and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
