The London Metal Exchange found bags of stones instead of nickel in a warehouse

In one of the warehouses of the London Metal Exchange (LME) in Rotterdam, instead of nickel, which was the basis of several contracts, they found bags of stones. The construction management canceled the documents and warned the owner. This was reported by Bloomberg, citing informed sources.

The contracts were for about 54 tons of nickel and were worth $1.3 million, which is a small amount – about 0.14% of the LME’s total nickel reserves. However, the incident may undermine confidence in the service at a difficult time for the metal market, writes Bloomberg.

Exchange management had to cancel nine warrants (collateral enabling the purchase of an asset at a predetermined price within a specified period of time) on nickel. It is not known to whom they belonged.

The warehouse where the stones were found belongs to Access World. It is one of the most famous LME approved warehouse managers. Until 2023, the company was owned by a Glencore dealer, and the cargo, where the stones were later found, was from early 2022.

In January 2023, Access World was acquired by Global Capital Merchants. It is not yet clear whether the nickel was originally in bags and whether the substitution was the result of theft, fraud or a mistake, the agency said.

LME warrants have always been the gold standard of quality and have been treated almost as cash equivalent, John McNamara, CEO of Carshalton Commodities Ltd. wrote on LinkedIn. “Something went wrong at the LME,” he said.

The LME urged other storage operators to double check the guaranteed nickel. Plant management noted that other metals that do not allow bagged delivery “are not subject to this type of infringement.”

The metal swapping incident at the LME warehouse takes place amid another nickel scandal. In February, trader Trafigura reported that he had been the victim of a serious scam with a supply of nickel and lost $ 577 million. In 1,100 containers disguised as metal, the trader received carbon steel, which costs several times cheaper. Trafigura has struck a deal with companies associated with Indian businessman Pratik Gupta.