Another key factor in the recent price volatility was the massive nickel short squeeze built up by Chinas Tsingshan Holding Group, the worlds largest stainless steel producer. Tsingshan and the LME declined to comment. NIC's operations and cash flow remained stable in 2022 despite Tsingshan's significant loss on its nickel short position in March 2022. Late on Monday, the LME also allowed traders to defer delivery obligations on all its main contracts -- including nickel -- an unusual step that underscores the pressure on commodities generally from the moves to isolate Russia economically. Tsingshan has said it has secured facilities with its consortium banks and will exit its position in an orderly manner. Singapore | A Chinese tycoon who built a massive short position in nickel futures is facing billions of dollars in mark-to-market losses after this weeks unprecedented price spike, according to people familiar with the matter. Then on March 7, nickel's price began its parabolic. By now, the entire nickel industry was in crisis. Follow the topics, people and companies that matter to you. Are you considering whether or not to trade nickel or want to learn more about the market? Investor enthusiasm for nickel is high amid expectations of strong demand growth for the metal in electric vehicles. See here for a complete list of exchanges and delays. https://www.wsj.com/articles/nickel-market-crisis-sends-london-metal-exchange-scrambling-to-prevent-damage-11646858558. Creditors and banks who acted for Tsingshan were demanding margin settlements and the closing of all positions. History of Financial Crises, AUTHORITATIVE ANALYSIS ON INTERNATIONAL BANKING, This site is protected by reCAPTCHA and the Google, Sign up to the International Banker newsletter, Perhaps whats most surprising is that this nickel squeeze happened within a market that had, for the last few years, been comparatively sedate, with rangebound trading rarely breaking, This market frenzy all came to a head on March 8, when the LMEhaving allowed nickel prices to surge by around 250 percent in just a couple of days and reach an all-time high of $101,365/metric tonne (mt) in intra-day trading, which was more than double the $48,078/mt at which it closed the previous daysuspended all trading of nickel. Nickel prices have since fallen and the three-month nickel last settled at $23,371/tonne on 3 November. Tsingshan's difficulties paying its margin calls have put its . 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Plus, 60% off clearance with American Eagle promo code, Wayfair promo code: 10% off any single purchase, Kohl's promo code: 30% off for Kohl's Rewards Members, 50% off + free delivery on any order with DoorDash promo code. They had offset their deals with Tsingshan by placing their own short positions on the LME. Perhaps whats most surprising is that this nickel squeeze happened within a market that had, for the last few years, been comparatively sedate, with rangebound trading rarely breaking above the $20,000/metric tonne (mt) mark on the upside before 2022. our Subscriber Agreement and by copyright law. The major market events for the week ahead right in your inbox. The wild rise of nickel drew comparisons to the short squeezes in meme stocks such as GameStop Corp. that gripped retail investors for much of last year. Its been under growing pressure to meet the payments in recent days, the people said. We expect the LME nickel price to remain volatile in the near term, as the global nickel market finds equilibrium following recent events, S&Ps Sappor added, warning that an elevated risk of another short squeeze hitting the LME nickel market in the near term continued, given the presence of both a dominant warrant-holding position on available LME stocks and Tsingshans short position. Screen for heightened risk individual and entities globally to help uncover hidden risks in business relationships and human networks. [2] It moved into the Indonesian nickel industry in 2009. The Initial Margin was $20,000 per contract. The short squeeze gathered momentum as Chinas Tsingshan Holding Group Co. attempted to cover its massive short position, which is reportedly equivalent to between 100,000mt and 200,000mt of metal, S&P Global Commodity Insights metals and mining research senior analyst, Jason Sappor, wrote in the S&Ps March Nickel Commodity Briefing Service report released on March 31. There are also traders making plans to abandon the LME nickel contract, a move that would reduce market liquidity, making it harder for everyone from miners to car companies to manage their exposure to prices and access financing. Those 18 minutes will haunt me, says the executive, who wasnt authorized to speak publicly. And that was just for the portion of the short position it held directly on the exchangeabout 30,000 tons. On the London Metal Exchange, the premier trading and price-formation venue for industrial metals, nickel traded between $10,000 and $20,000 per metric ton and moved about $100 each day. And it was already heading higher once more in February prior to the outbreak of war in Eastern Europe, partly on renewed interest in the metal as the global economy continued its recovery from the COVID-19 crisis as well as buoyant demand for electric vehicle batteries, of which nickel is a principal component. The metal is found in all our homes as a key ingredient of stainless steel. Based on the close on Friday night at $29,130, the LME were raising initial margins to a prudent 7.72% of the contract value. Jack Farchy, Alfred Cang and Mark Burton, Bloomberg News. The prices that were being seen during that Asian session were becoming disconnected from, I believe, physical reality.. LONDON (Reuters) -- China's Tsingshan Holding Group has reached an agreement with banks under which they will not make margin calls on or close out the producer's nickel positions on the London . The war in Ukraine surprised the market and led to a price surge, pushing Tsingshan's margin to billions as it rose in-line with nickel prices. Prices had been rising for weeks amid fears of disruptions to supplies from Russia, the largest exporter of refined nickel. Tsingshan Holdings was founded in 1988 by Xiang Guangda in Wenzhou. ", Britain's Financial Conduct Authority (FCA) and the Bank of England are talking to the London Metal Exchange about the resumption of a fair and orderly market in nickel, the FCA said on Monday in response to a request for comment. The LME is now very likely going to die a slow, self-inflicted death through the loss of confidence in it and its products, predicted Thompson in a tweet. Keep in mind that past performance is no guarantee of future returns. Tsingshan has been struggling to pay margin calls to its brokers, according to people familiar with the situation. a practice known in financial markets as margin calls. He started increasing his short position on the London Metal Exchange. Prices exploded, thanks mainly to one companyindeed, one man. In the meantime, the nickel market is on ice, with traders unable to exit their positions, and many billions of dollars tied up in margin calls. Known as Big Shot in China for his imposing presence in the metal industry, Xiang Guangda, the founder of the worlds biggest nickel and stainless-steel firm, Tsingshan, had amassed a short position of more than 150,000 tonnes of nickel, which was about five times the volume of the metal held by the LME and equivalent to approximately one-eighth of all of the LMEs outstanding contracts at its peak. A week earlier, nickel was trading around $25,000 and the price of the metal has more than quadrupled in a matter of days. Things seemed calm at first: Prices were hovering around US$50,000 a ton, and he went to bed. Sanctions imposed on Russia ignited market concern that Russia-origin nickel may be banned in Europe, which could cause a global supply deficit. Everything changed when Russia invaded Ukraine. You should never trade more than you can afford to lose. This report studies the Ferronickel market, covering market size for segment by type (Ferronickel (Nickel15%), Ferronickel (Nickel15-25%), etc. Challenges Remain, But There Are Opportunities to Be Interview with Mr. Olukayode Pitan, Chief Executive Officer Unemployment in South Africa: Urgent Attention Required, The US-Africa Leaders Summit: Fostering a Closer Relationship with the Continent, Agenda BC#: Innovation and Inclusion in the Brazilian Financial System, Why Fertiliser Prices Have Been So Volatile This Year. read more. At the center of the action is Chinese nickel titan Tsingshan Holding Group, the worlds biggest producer of a metal used in stainless steel and .css-1h1us5y-StyledLink{color:var(--interactive-text-color);-webkit-text-decoration:underline;text-decoration:underline;}.css-1h1us5y-StyledLink:hover{-webkit-text-decoration:none;text-decoration:none;}electric-vehicle batteries. LONDON, March 8 (Reuters) - China's Tsingshan Holding Group bought large amounts of nickel to reduce its short bets on the metal and its exposure to costly margin calls, turbocharging a. During the standstill agreement, the company and banks will discuss a standby secured liquidity facility, Tsingshan said. The London Metal Exchange initially announced rule changes late Monday in respond to a daily spike of as much of 90% (Reuters) Nickel, used in stainless steel and electric-vehicle batteries . Most market participants expect nickel prices to come back down once the crisis around Xiangs position has been resolved. read more. Margin call ini membuat harga nikel meledak dan menembus US$ 100 ribu per ton dari hanya US$ 25 ribu per ton. Nickel prices trading on the London Metal Exchange (LME) has fallen significantly over the past few months as restrictions cooled the turbulent market, pulling the metal down from its record high of above $100,000 a tonne on 8 March. In late February and early March, Tsingshan, which had sales of 352 billion yuan ($56 billion) last year, paid its margin calls on time. He draws a comparison with Silver Thursday, the day in 1980 when an attempt bythe Hunt brothersto corner the silver market came unstuck. Credit: INF News.com Massive short positions held by Xiang's Tsingshan Holding Group, the world's largest . To limit price volatility the LME imposed daily upper and lower price limits of 15% for all its physically delivered metals. The frenzied move the largest-ever on the LME came as investors and industrial users who had sold the metal scrambled to buy the contracts back after prices initially rallied on concerns . Given nickel matte prices of roughly $15,421/t May 18, we calculate a profit margin of $5,571/t for Tsingshan's nickel in matte. Screen for heightened risk individual and entities globally to help uncover hidden risks in business relationships and human networks. The company had a further 120,000 tons or more in short positions off the exchange, in bilateral deals with such banks as JPMorgan Chase & Co. and Standard Chartered Plc. This is lower than Nickel Mines' expected profit margin for nickel in matte at current prices. Financial markets are on edge after the London Metal Exchange last week granted a reprieve to the giant Chinese nickel producer, which . But its extremely unusual for an exchange to cancel whole sessions of trading after the fact. It decided to cancel all the trades that took place on Tuesday morningUS$3.9 billion of them, according to a Bloomberg calculation. (Podcast). Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com. In a squeeze, rising prices put traders betting on a drop in an ever-tougher financial position, forcing them or brokers and banks doing business on their behalf to buy the asset, a trade known as short covering that can drive prices even higher. Worse, the chaos was spreading to other markets: Zinc prices spiked 15 per cent in a few minutes to a record high, only to collapse again. If you rely on the information on this page then you do so entirely on your own risk. Terms & Conditions Finance Publishing Tsingshan's were even larger, numbering roughly US$3 billion, according to a Bloomberg calculation based on the company's total short positionwhich, even after Xiang . The LME made a near-unprecedented decision. It also doesn't create waste and may help fight the climate crisis. The London nickel market has been closed since last Tuesday morning, when the exchange intervened after prices spiked as much as 250% in two days, and the standstill announced by Xiangs Tsingshan Group Holding Co. could provide the certainty needed to restart trading. . The most comprehensive solution to manage all your complex and ever-expanding tax and compliance needs. For the LME, the future isunclear. read most from bloomberg The LME suspended nickel trading in the early trading session on March 8 after prices more than doubled, breaching $100,000/mt mark and briefly reaching a record high of $101,365/mt. In late February and early March, Tsingshan, which had sales of 352 billion yuan (US$56 billion) last year, paid its margin calls on time. The LMEs special committee held another call at about 6 a.m. Now they recognized that they had tosuspend trading. Nickels 250 per cent price spike in little more than 24 hours plunged the industry into chaos, triggering billions of dollars in losses for traders who bet the wrong way and leading the London Metal Exchange to suspend trading for the first time in three decades. 3.1 What is the margin call to Tsingshan? The price moves exacerbated the pressure on holders of big short positions, already facing calls to deposit extra funds with brokers, a practice known in financial markets as margin calls. China's Tsingshan Holding Group bought large amounts of nickel to reduce its short bets on the metal and its exposure to costly margin calls, turbocharging a record rally fuelled by the conflict . Prices of oil, gas, wheat and a range of metals, including aluminium and palladium, have soared since the invasion, ramping up costs for companies and consumers and threatening the nascent recovery from the coronavirus pandemic. It is up nearly 400% so far this year. Browse an unrivalled portfolio of real-time and historical market data and insights from worldwide sources and experts. Tsingshan is an excellent Chinese enterprise, and our positions and operations dont have any problems.. He ranked 235th on the 2021 Hurun's China rich list, which puts his net worth closer to $4.2 . This was the most disorderly move in a metal Ive seen in my career, says Mark Hansen, chief executive officer of trading house Concord Resources Ltd. We had a frenzy based on speculation that accelerated on Monday and Tuesday. This exact scenario emerged in early March in the LMEs nickel market following the escalation of the Russia-Ukraine military conflict, with Chinese nickel-maker Tsingshan Holding Group the unfortunate short seller in this episode. losed Joint Stock Company FinTech Solutions. Some hedge funds were buying nickel contracts in a bet on the electric vehicle boom. Executives at Tower Research Capital, one of Wall Streets oldest electronic market-makers, reined in its trading activity on the LME and put its membership in the exchange under review. On Monday, one of Tsingshans brokers a unit of a state-owned Chinese bank failed to pay hundreds of millions of dollars in margin calls on its nickel positions. Undeterred, the Chinese tycoon has told banks he wants tomaintain his position, and has asked them to keep funding him despite the losses. How to Geta Free Flight to Hong Kong in 500,000 Airline Ticket Giveaway, Apple Suppliers Are Racing to Exit China, AirPods Maker Says, Stocks, Bonds Drop as Traders Weigh Data, Fedspeak: Markets Wrap, Microsoft Expands Game Pass as Regulators Fret Over Activision Deal, Cash Is Paying More Than Traditional Stock-Bond Portfolio. The metals industry, financial regulators and Chinese officials rushed to resolve a crisis in Londons nickel market, which remained on ice after an ill-fated trade sparked mammoth price gains and billions of dollars of losses. Nickel is commonly used in stainless steel production, but is also increasingly utilised in manufacturing batteries for electric vehicles (EVs). The tightness in the market had been exacerbated by the presence of an unidentified trader who, according to exchange data, controlled somewhere between 50 per cent and 80 per cent of nickel warehouse warrants monitored by the LME as of last month. On February 22, 2023, Yangjiang News, at the "New Track, Great Future--Qingshan S32001 Duplex Steel Channel Market Launch Conference" hosted by Qingyi Steel The Chinese nickel tycoon whose big short position caused chaos reached a deal with his banks to avoid further margin calls, marking a key step toward restoring stability to the market after an unprecedented squeeze. But the Eastern European conflict also saw sizeable long positions enter the market, including major buyers Volkswagen, Glencore and JPMorgan, which instead drove prices higher. The LMEs history dates back to the early 19th century, when metal traders drew a circle in the sawdust on the floor of the Jerusalem Coffee House in the City of London. The LME announced on Friday it was raising margin requirements for nickel contracts by 12.5% to $2,250 a tonne. But recent events have certainly injected a dose of volatility into the market. It's been under growing pressure to meet the payments in recent days, the. 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The most notable holder of short positions is Tsingshan Holdings - one of the world's largest nickel and stainless steel producers - which is believed to own positions on about 100,000 tons of nickel with paper losses totaling up to $8 billion before the London Metal Exchange halted trading. https://www.wsj.com/articles/chinese-nickel-giant-tsingshan-faces-8-billion-trading-loss-as-ukraine-war-upends-market-11646765353. If nickel prices stay lofty it could complicate the energy transition with electric vehicle batteries costing more to produce. Box N-4865, Nassau, Bahamas. Tsingshan debacle exposes weak underbelly of LME. The current events are unprecedented, LME said in a notice. Xiang didnt believe the rally would last. Miners, traders, and manufacturers often use the market to make short betsthat is, to make money when prices fall. LME brokers and their clients were hit with margin call after margin call. Tsingshan's difficulties in paying its margin calls, and the company's ongoing bailout negotiations, have put its banks and brokers in a bind, as they have had to make hefty margin calls of their own at the LME to cover their short positions on the exchange. While the exact scale of Mr Xiangs losses is unclear, Tsingshans short position on the London Metal Exchange is in the region of 100,000 tonnes of nickel, people familiar with the matter said. .css-16c7pto-SnippetSignInLink{-webkit-text-decoration:underline;text-decoration:underline;cursor:pointer;}Sign In, Copyright 2023 Dow Jones & Company, Inc. All Rights Reserved, Final Early Bird Pricing! In recent days, Tsingshan has been under growing pressure from its brokers to meet margin calls on that position - a market dynamic which has helped to drive prices ever higher. Solugen Bio has built a chemical plant that produces all manner of chemical-based products using bio-based feedstock instead of fossil fuels. Tsingshan sold 200,000 ton March 2023 contracts at price of $20 per kilo. An employee. For Xiangs big short position, that was painful. LONDON, March 14 (Reuters) - China's Tsingshan Holding Group has reached an agreement with banks under which they will not make margin calls on or close out the producer's nickel positions on the London Metal Exchange (LME), the company said on Monday, a move sources said should help calm the market. Tsingshan Holdings has secured loan packages from various lenders, according to a Bloomberg report citing unnamed sources, following a record short squeeze that saw nickel prices more than double in hours earlier this week. Assessing the Incremental Costs of Regulation and Supervision Faced by EU Banks Compared to Their US Peers, Interview with Mr. lvaro Saboro, Chief Executive Officer, Grupo Financiero BCT. The creditors involved include both local and intentional banks, including J.P. Morgan and China Construction Bank . But to hedge against a a drop in prices, they use. Tsingshan has been finding it difficult to pay margin calls to its creditors, the report said. Several large brokers got margin calls of close to US$1 billion each over the course of the day. Tsingshan's 2022 nickel equivalent output is . (HNI) to produce higher-grade nickel matte. For a while, it wasunclear which view of the market would prevail. Nickel prices shot up as much as 250% in two days on the LME at the start of this week. Nevertheless, the short squeeze did trigger a whopping $8 billion margin call on Guangda. LME brokers and their clients were hit with margin call after margin call. For non-personal use or to order multiple copies, please contact Nickel or want to learn more about the market tsingshan said the situation you! Will exit its position in an orderly manner increasingly utilised in manufacturing batteries for electric vehicles events are,... 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