Tsingshan's short squeeze broke the LME — $19.7B in margin calls, 9,000 trades cancelled

The London Metal Exchange is the world's oldest and largest metals exchange, trading $16 trillion in contracts annually. In March 2022, it faced the most severe crisis in its 145-year history when a single Chinese company's short position triggered a $19.7 billion margin call that nearly collapsed the clearing house.

Tsingshan Holding Group, a Chinese stainless steel and nickel producer, had built a short position of more than 150,000 tonnes of nickel — roughly 25,000 LME lots — to hedge its production. When Russia invaded Ukraine on 24 February 2022, nickel prices surged to a ten-year high on concerns that Russian supply from Norilsk Nickel would be disrupted. By 4 March, nickel was trading at $29,130 per tonne. On 7 March, it rose 69% to close at $50,300. On 8 March, it spiked to an intraday peak of $101,365 per tonne — a 270% surge in three days.

The margin calls were catastrophic. LME Clear's first margin call on 7 March totalled over $5.1 billion, and four clearing members missed the deadline. An intraday margin call on 8 March was projected at $19.75 billion — enough to default seven clearing members and exceed the clearing house's pre-funded resources by $220 million. The LME suspended trading on 8 March and cancelled all nickel trades executed since midnight — roughly 9,000 trades worth up to $12 billion. Tsingshan avoided an estimated $8 billion loss by securing a standstill with its brokers.

The LME suspended trading and cancelled 9,000 trades, preventing a systemic collapse but setting a precedent that damaged its reputation as price-setter.

Tsingshan built a 150,000+ tonne nickel short to hedge its production, but the position was far larger than the market could absorb — when prices surged, margin calls hit $8 billion in a day

The LME's margin system was not designed for a 270% price surge in three days — the planned $19.75 billion intraday margin call would have collapsed the clearing house, triggering defaults at 7 firms

The LME's position limits did not apply to hedging positions, so Tsingshan's outsized short grew unchecked — the exchange had no way to flag a position that could threaten the whole system

The LME's decision to cancel trades, while preventing a systemic collapse, set a dangerous precedent — the exchange chose legal certainty over market integrity, damaging its reputation as price-setter

A margin system that cannot survive a 270% move in three days is not a safety net — it is a fuse. The LME near-collapsed because a position structure made the clearing house the only backstop.