Inside is only stone
According to the Wall Street Journal (WSJ), a warehouse operator checked out a shipment of goods believed to contain 54 tons of nickel, but discovered that the inside was only stone. The incident dealt a blow to confidence in the struggling metal exchange.
Sources familiar with the matter said that JPMorgan Chase & Co – the largest bank in the US and also the world’s largest by market capitalization – is believed to be the owner of this shipment.
Nickel bags when checked were all bags of ice. Photo: Getty.
If these shipments contained nickel, they would be worth $1.3 million at current value. The volume of nickel in the shipment accounted for 0.14% of the nickel in storage of the LME.
While this incident had a small impact on the world metals market, it raised questions about the security of LME contracts. In this high-risk industry, LME contracts are considered unquestionably safe.
News of the incident raises new questions about the systems and operations of the LME as the 146-year-old exchange has weathered the aftermath of the last nickel crisis.
John MacNamara, chief executive officer of Carshalton Commodities Ltd. and many years of experience in the commodity sector, shared on LinkedIn: “LME warehouse receipts are often the gold standard for warehouses worldwide, and are considered a cash equivalent. This incident is truly a disaster for the LME.”
The incident caused panic for customers
It also comes at a difficult time for the metals industry, after trading giant Trafigura revealed in February that it was the victim of a major scam, allegedly involving shipments of nickel lost.
The news that a company as powerful as Trafigura was facing hundreds of millions of dollars in losses sent others in the industry panicking and demanding that their goods be inspected in warehouses.
However, metal has always been considered safe when registered in an LME-approved warehouse. Contracts on the LME are the global standard for industrial metals such as aluminum, copper and nickel.
Exchange at LME. Photo: Bloomberg
The WSJ reported that the LME first reported the incident late last week, but did not disclose the owner of the warehouse where the shipments were stored. However, some well-informed sources revealed that the warehouse is owned and operated by Access World.
Access World confirmed to Business Insider that it is currently testing nickel shipments across all locations. Currently, in the internal warehouse, only the above 54-ton warehouse has been found to have problems and this is only “an isolated case, only occurring in the warehouse in Rotterdam”.
The main sufferer
The WSJ said that it is likely that Access World will bear a large financial burden for this incident, not JPMorgan Chase, because Access World’s responsibility is to protect the metal warehouse in its facilities.
According to the WSJ, JPMorgan Chase purchased the shipment many years ago and is still an active player in the metals sector.
The marbles are made of nickel. Photo: Bloomberg
For the metal industry, the loss of goods is not unusual. And it is not unusual for nickel – a commodity favored for its high value.
In 2017, French and Australian banks suffered 2017 losses totaling more than $300 million after they discovered forged nickel documents stored in vaults in Asia owned by AccessWorld.
JPMorgan Chase and LME did not respond to Insider’s requests for comment.