The price of nickel traded in London rocketed to a record high as fears of a Russian supply shock left buyers of its high-quality output exposed to geopolitical risks.

Russia, which invaded its neighbour Ukraine 13 days ago, is a major producer of nickel, a metal used to make stainless steel and batteries for electric vehicles.
Russia, which invaded its neighbour Ukraine 13 days ago, is a major producer of nickel, a metal used to make stainless steel and batteries for electric vehicles. (AFP)

The London Metal Exchange has suspended trade in nickel after the base metal rocketed to a record peak above $100,000 as Russian supply concerns sparked sharp volatility.

"Following further unprecedented overnight increases in the three-month nickel price, the LME has made the decision to suspend trading for, at minimum, the remainder of today," the exchange said in a brief statement on Tuesday.

Nickel earlier spiked to an all-time pinnacle of $101,365 per tonne.

It later settled back to $80,000, up 66.4 percent from Monday, before the market was halted.

"We suspect that a so-called short squeeze is partly responsible for the extraordinary price surge, in addition to the concerns about supply," said Commerzbank analyst Daniel Briesemann.

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Russia is 3rd largest producer

"Some market participants who had been betting on falling prices were clearly surprised and wrong-footed by the price upswing and momentum since Russia's invasion of Ukraine."

A short squeeze occurs when investors bet on falling prices but are then wrong-footed by the market and forced to close out their positions and purchase at a far higher price, sparking a volatile spike.

"We regard the price surge as exaggerated and expect trading to calm down again once the short squeeze has run its course," cautioned Briesemann.

Russia, which invaded its neighbour Ukraine 13 days ago, is a major producer of the metal used to make stainless steel and batteries for electric vehicles.

As a result, nickel has blazed a record-breaking trail, after jumping to $54,880 on Monday to shatter its prior 2007 peak.

Russia's invasion of Ukraine and Western sanctions against Moscow have caused turmoil in commodity markets, sending the prices of everything from oil to gas to aluminium to wheat soaring.

Russia is the world's third biggest producer of nickel, noted Benjamin Louvet, analyst at OFI Asset Management.

"For now, the main producers of metals in the country have been spared by sanctions, but many companies in this sector are headed by oligarchs close to Vladimir Putin," Louvet said.

"The impact of such sanctions could be significant, as 37 percent of Russian exports go to the Netherlands and 16 percent to Germany," he said.

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Source: TRTWorld and agencies