Nickel surged as much as 40%, in one of the most extreme price moves ever seen on the London Metal Exchange, as fears over Russian supplies leave buyers exposed to a historic squeeze. 

The metal used in stainless steel and lithium-ion batteries added more than $10,000 to trade at a 15-year high above $40,000 a ton, in the biggest-ever daily dollar gain in the 35-year history of the contract. Palladium also spiked sharply higher amid rising risks to shipments from one of the world’s top producers of the metal.

Nickel’s surge builds on a 19% gain seen last week as banks cut exposure to Russian commodities suppliers and major shippers steered clear of the country’s key ports. Now, as the U.S. weighs a potential ban on Russian oil imports, traders are questioning whether industrial consumers will elect to avoid buying other Russian raw materials, even in the absence of direct prohibitions on purchases. 

While prices surged, a key one-day nickel spread traded at the biggest discount since 2009 on the London Metal Exchange, while the equivalent spreads for copper and zinc also loosened dramatically. One possibility is that holders of Russian metal stored in LME warehouses have chosen to relinquish their holdings, according to two nickel traders.

“Commodity markets are increasingly pricing in a scenario under which a significant portion of Russian supply will be excluded from the market,” Morgan Stanley said in a note. “Prices are likely to remain highly volatile, until the real supply impact becomes clearer and prices can start to settle at a new equilibrium.”

Liquidity deteriorated dramatically in the nickel market overnight as sellers rushed to the sidelines, leading to sharp price jumps between trades as short-position holders scrambled to buy back positions. Plus, bullish investors in China are piling into nickel on the Shanghai Futures Exchange, said Wang Yanqing, an analyst with China Futures Co.

“The nickel market is the tightest it has been since the commodity supercycle during the 2000s,” Citigroup Inc. analysts wrote in a note before Monday’s unprecedented spike. Prices are set to boom in the near term, they said. 

READ: LME Nickel One-Day Spread Trades in Widest Contango Since 2009

Nickel’s stunning surge was just one part of a tumultuous start to the week across energy and commodities. Copper and aluminum both rose to all-time highs, as soaring oil prices and fears of supply shocks rattled raw-materials markets amid Russia’s invasion of Ukraine.

“Already tight markets could see even larger shortages if Russia’s mined commodity exports were to be significantly affected,” Morgan Stanley said. “Against a backdrop of generally low inventories, demand destruction would become necessary under such a scenario.”

READ: Putin’s War Wrecks Supply of Metals Vital to Clean Energy Shift

Secretary of State Antony Blinken said Sunday the U.S. and its allies are looking at a coordinated embargo following Russia’s invasion of Ukraine. The Biden administration could also act alone. That triggered a spike in oil prices -- and higher energy prices mean steeper costs for manufacturers including metals smelters.

Nickel touched a high of $40,600 a ton on the LME. All other base metals also advanced. Spot palladium rallied as much as 14%.

Nickel’s upward momentum will continue in the coming weeks before demand destruction becomes a risk, Wang said. In China, investors are also monitoring for possible inflows from Russia with some of those cargoes being shunned by European or North American markets.