JPMorgan is Assessing Commodity Exposure Following a Short Squeeze in Nickel Market

SHANGHAI, Apr 6 (SMM) - JPMorgan is reviewing business with some commodities clients following a short squeeze in LME nickel futures last month, a move that could lead to further outflows from the sector.

JPMorgan senior management has asked teams around the world to conduct new due diligence on some existing clients, including metals traders and refiners, according to people familiar with the matter. JPMorgan is also conducting risk assessments on certain financing units, the source said.

Before the nickel short squeeze, JPMorgan was already monitoring and adjusting its exposure to commodities amid heightened market volatility, another person familiar with the matter said. JPMorgan has been conducting a more in-depth assessment since nickel prices surged in early March, the person said.

 "In line with prudent risk management, we have been assessing risk based on significant market events that have occurred this year, and we will continue to do so in all markets, but we remain committed to our commodities business." JPMorgan said in a statement.

Liquidity in commodity markets has plummeted as high prices and wild volatility forced traders to stay on the sidelines.

It's unclear what the outcome of the assessment will be, but it could lead to JPMorgan scaling back its commodities business, the source said. The bank is already reducing its exposure to the nickel market. The bank is also requiring additional management approval for new financing deals in the metals field.