(Bloomberg) -- Some Shanghai Futures Exchange nickel contracts dropped by the daily limit as trading partially resumed on the Chinese bourse, in a sign that an extreme short squeeze that’s driven global prices sharply higher may be starting to ease.

Five contracts for delivery between March and February next year all slumped as the bourse’s evening session got underway, with four falling by the daily limit. About half of the exchange’s contracts remained suspended following limit-up gains.

The London Metal Exchange halted trading in its nickel market on Tuesday, after a surge in prices left brokers and industrial users scrambling to pay margin calls against loss-making positions. As LME prices soared as much as 250% over Monday and Tuesday, a huge disconnect emerged against Shanghai contracts, where maximum daily gains and losses are capped.

The SHFE nickel contract for March delivery fell as much as 7.2% to 236,000 yuan ($37,352) a ton, and was trading at 242,500 yuan at 2:30 p.m. London time. The August contract slumped to 211,500 yuan a ton, falling by a 17% daily limit.

The slump will be closely watched by traders who are questioning when the London market will reopen, and what will happen to prices when it does. The unprecedented surge on the LME to above $100,000 a ton before Tuesday’s suspension, has come as traders and industrial users with short contracts have scrambled to buy back their positions in an increasingly illiquid market. 

The bourse is now exploring whether large buyers and sellers will agree to liquidate their holdings before the market reopens, in a bid to take the steam out of the rally. 

Tsingshan Holding Group Co, the Chinese nickel company at the center of the historic short squeeze has secured a package of loans from local and international banks to help it meet a wave of margin calls, Bloomberg reported earlier.

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