London Metal Exchange hammered with $450m lawsuit

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7th June 2022

Bite-sized business news from the UK and beyond

Good morning 148. That’s the number of votes Boris Johnson received against him in last night’s no confidence vote. It falls short of the 180 needed to oust the prime minister meaning he lives to fight another day. But the big question is how long could he survive?

Today's stories

London Metal Exchange hammered with $450m lawsuit
UK rental market facing unprecedented squeeze

COMMODITIES
London Metal Exchange hammered with $450m lawsuit

What happened?
The London Metal Exchange is being sued by the New York hedge fund Elliott Management for $456m over its decision to temporarily shutdown nickel trading three months ago.

Recap: In March nickel prices went through the roof, more than doubling in price to $100,000 per ton before the LME - the world’s largest exchange - stepped in and suspended trading for a week.

The price rise was partly due to a ‘short squeeze,’ which happens when a lot of traders bet against (or ‘short’) an asset and the price starts to rise instead, as it did with nickel… spooking traders into bailing on their short bets, which drives the price up even further.

The war in Ukraine also impacted prices. Russia produces 10% of the world’s nickel and the country’s invasion of Ukraine has led to general fears of commodity shortages. Nickel is a key raw material to the global economy and is mainly used to create stainless steel, which is used in everything from utensils to machinery to electric vehicle batteries.

“Unreasonably and irrationally” is how Elliott described the LME’s decision to cancel trades made on 8 March, the first day of the market suspension. The LME said it did this to protect the market when it became disorderly. It says it’s ready to contest Elliot’s claim “vigorously”.

The events has threatened to derail LME’s position as the global centre for metals trading and main benchmark for pricing.

Elliot isn’t the only organisation questioning the events in March. The UK financial regulator and the Bank of England are investigating the LME’s actions to suspend and cancel trades.

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PROPERTY
UK rental market facing unprecedented squeeze

What happened?
The number of rental properties in the UK has dropped by almost 50% since 2019, according to new research from Propertymark, a body representing estate and letting agents.

The data paints a worrying picture for private renters. The survey of 443 agents across over 4,000 branches in the UK found that between March 2019 and March 2022 there was a 49% fall in the number of private rentals and 94% of landlords who removed their property from the rental market did so to sell them.

Stories of renters increasing their deposits, offering landlords CVs for their children and photos of their well-behaved dogs indicates just how competitive the market is.

It’s a case of demand for homes far outstripping supply. The number of properties available to rent has been falling in recent years with a large portion of landlords choosing to sell their properties. The trend has been driven by increased regulation and lower tax benefits which has made being a landlord less profitable.

The lack of property stock is the root cause of rent increases and rising figures on social housing lists. Last month, property search site Rightmove reported that asking rents are at record highs, and up 11% to £1088 per month outside of London.

Stat of the day

70 UK companies with more than 3,300 workers will this week start a six month trial to test whether a four-day week can be adopted without a corresponding loss of productivity

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London Metal Exchange hammered with $450m lawsuit

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