JP Morgan’s $2m nickel consignment turns to stone, LME investigates
If the bags had contained nickel, they’d have been worth US$1.3 million (A$1.95 million) at current prices.
Nickel received by trading house JP Morgan from the London Metal Exchange (LME) has turned out to be just bags of stone.
The mix-up occurred at a warehouse owned by LME-approved firm Access World in Rotterdam where bagged nickel briquettes were found to not have the correct weight.
The consignments turned out to be filled with stones rather than metal.
Had they contained nickel, the bags would have been worth US$1.3 million (A$1.95 million) at current prices, representing 0.14% of nickel inventories.
The news has been met with shock in the metals world, because LME contracts are generally viewed as being “beyond question”.
Cancelled contracts
Last week, the 146-year old LME cancelled nine warrants (or 54 tonnes of nickel) which had failed to meet the specification of its nickel contract.
Warrants are title documents conferring ownership of metals stored in LME-registered warehouses.
At the time of cancellation, the LME did not disclose the owner of the bags or the warehouse in which they were stored.
It has since been revealed that JP Morgan became the unlucky one, registering the bags of material as being deliverable against LME contracts in early 2022.
There has been no suggestion that JP Morgan did anything wrong as the material was already inside Access World’s warehouse when the bank bought it several years ago.
Internal investigation
Access World has launched an internal investigation and hired external surveyors to assist with inspections of bagged nickel at all of its storage locations.
It is not clear whether the bags ever contained nickel, and if the issue was a result of error, theft or fraud.
Under the LME’s rules, warehouses are responsible for inspecting and verifying metal.
They are required to hold appropriate insurance, while physical metal traders typically are insured against risks such as theft.
The LME is believed to have also carried out its own mass inspections in Europe and Asia with no other issues reported.
Isolated case
Access World has said the incident was an isolated case and specific to the Rotterdam warehouse.
It said there was no indication that LME rules and regulations were not followed when the material was warranted.
The nickel mix-up is expected to have a relatively minor impact on metal markets.