Nickel prices double to record $100,000 a ton, trading suspended in London

Traders, brokers and clerks on the trading floor of the open outcry pit at the London Metal Exchange Ltd. in London, U.K., on Monday, Feb. 28, 2022.

The trading of nickel was suspended by the London Metal Exchange.

The trading will be suspended for the rest of the day.

The LME will announce the mechanics of the reopening of the nickel market as soon as possible.

The exchange said that it had been watching the situation in Russia and Ukraine and that it had affected the nickel market.

Commodity prices have gone up due to supply fears related to Russia's onslaught of Ukraine, with the ongoing war and an array of Western sanctions raising disruption fears.

Three-month nickel on the London Metal Exchange jumped to a record high above $100,000 per metric ton on Tuesday, before paring some of its gains.

Russia is a key producer and exporter of metals and grains. Russia is the third-largest producer of nickel in the world, which is a key ingredient in the production of steel and batteries.

As banks have cut their exposure to Russian commodities and as shipping giants avoid the country's key ports, metal prices have soared.

Markets were already tight before the invasion of Ukraine, meaning there was little ability to absorb any output cuts.

Ole Hansen, head of commodity strategy at Saxo Bank, described the surge in nickel prices as crazy.

The market is dangerous because it is not driven by supply and demand, but by fear.

The assumption that Russian supplies would not be disrupted helped market participants take advantage of the rally in commodity prices.

Suddenly a major funnel of supply from Russia has been cut off, especially in the metals space. He said that these participants need to get out of a naked short.

Short selling is a bearish investing practice in which an investor bets the price of an asset will fall. A short squeeze occurs when a large number of investors short an asset, the price goes up and the investors exit their positions at the same time. The short squeeze pushes prices higher because exiting a short position involves buy orders.

Major losses are expected in these markets due to the unwind of global trade.

CNBC's Pippa Stevens contributed to the report.