LONDON – Nickel fell as much as 11.6% on Wednesday in volatile and illiquid trade as a rally in which prices of the stainless steel ingredient rose 40% in just two weeks came to a juddering halt.

Traders blamed low liquidity for the volatility, the most severe since March. The London Metal Exchange (LME) on March 8 cancelled all nickel trades and suspended the market for more than a week after prices doubled in a matter of hours.

Other industrial metals such as copper and zinc have also risen on hopes that China will abandon its zero-Covid policy and the pace of U.S. interest rate rises will slow, boosting economic growth and metals demand, but the moves were a fraction of nickel's.

Traders in the physical market and speculators bought metal to reverse short positions ahead of contract expiry on the Shanghai Futures Exchange on Tuesday and LME on Wednesday, said Al Munro at brokerage firm Marex.

Once these contracts expired, the need to buy evaporated, creating downward pressure on prices, he said, adding that buying interest from China dried up as nickel headed towards $30 000.

Adding to turbulence was news on Tuesday that New Caledonian nickel producer Prony Resources would cut output after a leak from its tailings dam.

Benchmark LME nickel CMNI3 racked up six consecutive days of gains between November 8 and November 15, starting the first at $23 330 a tonne and reaching as high as $31 275 on the last.

On Monday, prices breached the 15% daily limit on price swings for the first time since March when they were imposed