The Nickel Bag Mystery

In today's economy, no one and nothing is safe - from individuals, to investors, to housing, and even to banks. We're not just talking about the recent banking fiascoes you've seen in the news. This issue is arguably worse, and if you have a sense of humor, kind of funny until you think about impact. Apparently, scammers have been stuffing bags of nickel with rocks to give the appearance that more nickel is being traded than what is actually being produced.

JPMorgan has warned warehouse workers in the Rotterdam location to check the bags if nickel to ensure that the only thing in the bags is nickel. Since at least one of the two-ton bags of nickel was discovered to be stones in the Netherlands, this created a chain of checking instead of trusting bags of nickel across the world. In fact, the London Metal exchange has also started advising workers to check bags of nickel by kicking them.

To be clear, these workers aren't kicking with regular shoes, but steel toed boots. Otherwise, there would be a significant increase in foot and toe related injuries at all warehouses that are making checks. How have the worldwide checks gone? So far, so good; there haven't been any additional bags of rocks discovered, but what happened to JPMorgan's nickel bags is still unclear. JPMorgan has nine contracts with the London Metal Exchange, or should we say had since as of right now they have been invalidated as all of their bags were found to be filled with stones. The company that runs the warehouse suspects someone snuck in and stole the nickel since there are weight records that match what 2 tons of nickel should be at the facility. This would make sense, as 2 tons is not something easy to measure by eye and this is not a case of having a cheaper metal mixed into the bunch causing the weight of the bag or individual bars to be different than what is expected. That sounds a bit odd, but remember different metals have different properties including density and that impacts the volume of a metal you get when it is weighed.

As of right now, it doesn't appear that the stone bags have been weighed to verify that it was indeed nickel that was first brought to the warehouse and then switched, but we'll see as this story develops more.

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