Just after 6 a.m., the price of nickel passed US$100,000 a ton. Nickel short interest was created by Tsingshan. 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It also doesn't create waste and may help fight the climate crisis. Nickel rocketed to a record high above $US100,000 a tonne on Tuesday, driven in part by Tsingshan and its brokers activity, before trading was suspended. For most of the past decade, theyd traded between US$10,000 and US$20,000. It is up nearly 400% so far this year. While Mark Thompson, executive vice-chairman at mining-development company Tungsten West, tweeted: The LME is now very likely going to die a slow, self-inflicted death through the loss of confidence in it and its products.. Pada titik ini, posisi short Tsingshan dibekukan. The question is, will it continue to fail? Ghali posited to CNN. Moscow's invasion of Ukraine and the west's moves to sanction Russia, a key major supplier, have electrified an already bullish nickel market. The Companys registered office is at Bahamas Financial Centre, 3rd Floor, Shirley and Charlotte Street, P.O. CCBI Global Markets is another creditor, two separate sources said. Nickel prices doubled on Tuesday and briefly rose above a record $100,000 a tonne as banks and brokers rushed to close part of a huge position amassed by Xiang Guangda, the billionaire founder of. Cliff Asness, founder of AQR Capital Management,accused the LME, which was for more than a century owned by its members but in 2012 was sold to Hong Kong Exchanges & Clearing, of stealing money from market participants trading in good faith and giving it to Chinese nickel producers and their banks. LMEs Chamberlain defended canceling the trades. Continue reading your article witha WSJ subscription, Already a member? But the effects of the short squeeze are likely to be felt in other ways. Bloomberg: Balance of Power focuses on the politics and policies being shaped by the agenda of President Biden's administration. UNFORGIVEABLE,tweetedMark Thompson, a former trader at Trafigura and Apollo. Its nickel matte production in Indonesia is nearly 8,000 tonnes per month, according to the Shanghai Securities News. Then, as now, a key factor was the intervention of the exchange. It was a classic short squeeze, as the pain for Tsingshan, its brokers, and other shorts created a self-reinforcing cycle. Some think this could herald the end of the exchange itself. 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 record rally fuelled by the conflict in Ukraine, three sources familiar with the matter said. Tsingshan's 2022 nickel equivalent output is estimated at 850,000 tonnes. The metal is found in all our homes as a key ingredient of stainless steel. (Bloomberg) A unit of China Construction Bank Corp was given extra time by the London Metal Exchange to pay hundreds of millions of dollars in margin calls it missed on Monday amid an unprecedented rise in nickel prices, in this case According to people familiar with . The first source said that the banks could potentially earn money on a bridge loan secured by future nickel production if Tsingshan paid them back over time as it produced nickel. 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. 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. Your decision to trade should depend on your attitude to risk, expertise in the market, the spread of your portfolio and how comfortable you feel about losing money. Privacy Policy | Mr Xiang began building the short position in part because he wanted to hedge rising output, but also because he believed the rally in nickel prices would fade this year. The war in Ukraine surprised the market and led to a price surge, pushing Tsingshans margin to billions as it rose in-line with nickel prices. Traders must deposit cash,. Following Russias invasion of Ukraine on 24 February, the three-month nickel contract rocketed to more than $100,000/tonne on 8 March, hitting an intra-day high at $101,365 on the same day. Bloomberg: Balance of Power focuses on the politics and policiesbeing shaped by the agenda of President Biden's administration. Several large brokers got margin calls of close to US$1 billion each over the course of the day. Hansen of Concord Resources argues that financial investors who traded nickel last week should have been prepared for the LME to step in. 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. Li Huan/Red Star News/VCG via Getty Images. Its unclear whether he will get his way. NIC's operations and cash flow remained stable in 2022 despite Tsingshan's significant loss on its nickel short position in March 2022. The LME has been asleep at the wheel, according to Andrew Mitchell, director of nickel research at consulting firm Wood Mackenzie, who spoke to the Wall Street Journal. 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 prices that were being seen during that Asian session were becoming disconnected from, I believe, physical reality.. On this day, however, metal traders across the city were glued to a screen, watching the price action on the electronic market, which was already open to accommodate Asian trading. Mampukan Tsingshan bertahan? During the standstill agreement, the company and banks will discuss a standby secured liquidity facility, Tsingshan said. A short squeeze is a market condition caused by massive short positions. The industry leader for online information for tax, accounting and finance professionals. Most market participants expect nickel prices to come back down once the crisis around Xiangs position has been resolved. 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. 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. Creditors and banks who acted for Tsingshan were demanding margin settlements and the closing of all positions. The broker was able to settle the margin calls on Tuesday after several clients, including Tsingshan, got loans to cover their positions, one of the people said. Short-covering trades made last week by the Chinese billionaire contributed to a swift, huge surge. [2] It moved into the Indonesian nickel industry in 2009. Weve received a lot of phone calls today, he said. Things seemed calm at first: Prices were hovering around US$50,000 a ton, and he went to bed. Keep in mind that past performance is no guarantee of future returns. Given our role in supervising the LME, we have been, and will continue to be, taking a very close interest in how it is managing and responding to the issues, the FCA confirmed in late March. Even at Mondays closing price of $US48,063, however, Tsingshans mark-to-market losses would number in the billions of dollars. Prices doubled to a record above $100,000 per tonne in a matter of hours on Tuesday, prompting the London Metal Exchange (LME) to halt trading. The most comprehensive solution to manage all your complex and ever-expanding tax and compliance needs. It did not provide any other details, such as how long the standstill period would last. Tsingshan has secured credit promises from banks including JPMorgan Chase & Co. and China Construction Bank that could allow it to avoid defaulting on its margin calls, Bloomberg reported. Tsingshan Holding Group held the biggest short position for nickel on the LME. 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. Chinese metal giant Tsingshan Holding Group Ltd., caught in a massive short squeeze amid an unprecedented rally in the price of nickel, reached a deal with banks to avoid further margin calls.. Tsingshan, one of the world's biggest nickel and stainless steel producers, worked out a standstill arrangement with a consortium of hedge bank creditors that will allow the company to continue . Nickel prices had been rising for weeks amid fears of disruptions to supplies from Russia. 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. The exchange then retroactively wiped out $3.9 billion worth of transactions made before the suspension to demonstrate that nickel prices had stopped reflecting the underlying physical market. Matthew Chamberlain, the LMEs chief executive officer, had stayed up to watch. News Corp is a global, diversified media and information services company focused on creating and distributing authoritative and engaging content and other products and services. The current events are unprecedented, LME said in a notice. That put Tsingshans banks and brokers, which include JPMorgan Chase, BNP Paribas, and Standard Chartered,in a bind. Others took to social media. Until yesterday, it appeared that a bailout plan for Chinese stainless steel titan Tsingshan Holding Group owned by "Big Shot" Xiang Guangda (and which was facing an $8 billion nickel margin call following the explosive surge in Nickel prices which briefly soared above $100,000/ton up 4x in just a few days, or would be if the Hong Kong-owned LME ever reopened Nickel trading) was coming along . But according to Bloomberg, the LME refrained from putting it into default, which allowed the broker to settle the margin calls the following day after several clients, including Tsingshan, received loans to cover their positions. 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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. ), by sales channel (Direct Channel, Distribution Channel), by player (Shandong Xinhai Technology, Tsingshan Holding Group, Eramet, Linyi Yichen Alloy, Jiangsu Delong Nickel Industry . Browse an unrivalled portfolio of real-time and historical market data and insights from worldwide sources and experts. Xiang Guangda has been in discussions with banks led by JPMorgan Chase & Co. about a loan facility to backstop his short position, which has roiled the nickel market after he struggled to pay massive margin calls to banks and brokers last week. The difference between trading assets and CFDs. Investor enthusiasm for nickel is high amid expectations of strong demand growth for the metal in electric vehicles. Beijing is supportive of him, Xiang told contacts recently. Read on for our analysis on the recent LME nickel short squeeze and the market outlook. Screen for heightened risk individual and entities globally to help uncover hidden risks in business relationships and human networks. At that time of day, bleary-eyed traders are typically just glancing at prices as they swig coffee on their way to the office. Today, Tsingshan is the biggest nickel producer in the world, accounting for around 20% of the global market. A sharp surge in nickel prices triggered margin call fears at the London Metal Exchange which suspended trading after prices doubled in hours. Capital Com Online Investments Ltd is a limited liability company with company number 209236B. Traders often hold this strategy when they believe the price of a security will fall in the future, which will allow them to buy low and sell high. However, for business days 7th and 8th March, they would remain at . The LME suspended trading in nickel on Tuesday morning after one of the most dramatic price spikes in commodity market history. Reuters could not determine how large Tsingshan's short position currently is after it cut its exposure. A stressful week in markets got even worse for some metals traders when the main exchange's software misfired by generating erroneous margin calls, adding to the chaos at a time when brokers . Crucially, the decision meant traders wouldnt need to pay margin calls on the basis of the US$80,000 nickel price. That means it would have suffered much more than $US2 billion ($2.7 billion) of daily losses at the most extreme point of nickels surge. For Xiangs big short position, that was painful. Tsingshan was betting that nickel prices would slump but instead they staged an unprecedented rally amid severe economic sanctions against Russia, a major global producer of the metal, over its invasion of Ukraine. Reuters provides business, financial, national and international news to professionals via desktop terminals, the world's media organizations, industry events and directly to consumers. It could be even larger than that when positions taken through intermediaries are taken into account, people separately said. Credit: INF News.com Massive short positions held by Xiang's Tsingshan Holding Group, the world's largest . But recent events have certainly injected a dose of volatility into the market. Prices for the metal, used in stainless steel and electric vehicle batteries, were last in that range in December. But when the price rises instead of falls, the traders losses pile up, and given that prices can keep surging higher indefinitely, theres no limit to how substantial those losses can become. 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. Traders must deposit cash, known as margin, with their brokers on a regular basis to cover potential losses on their positions. The sharp increase in nickel prices was driven by supply concern exacerbated by Russias invsion of Ukraine Russia is the third largest primary nickel producer after Indonesia and China. If you are considering investing or trading nickel, its important to do your own research. He ranked 235th on the 2021 Hurun's China rich list, which puts his net worth closer to $4.2 . Build the strongest argument relying on authoritative content, attorney-editor expertise, and industry defining technology. Nickel trading did resume on March 16, but the exchanges electronic trading system malfunctioned on several occasions after resumption, while preset daily limits on price movements (5 percent on the 16th, then 8 percent the following day, 12 percent on March 18 and 15 percent from March 21) prevented futures prices from falling sufficiently to levels that would entice buyers to enter the market once more. The LME did not put it into default, instead giving it more time to pay. Join the 500.000+ traders worldwide that chose to trade with Capital.com, Also you can contact us: The company paid at least some of its margin calls early on Monday, according to a person familiar with the matter. In late February and early March, Tsingshan, which had sales of 352 billion yuan ($56 billion) last year, paid its margin calls on time. Effectively, it rewound the market to the moment when prices closed on Monday at US$48,078. Nickel prices shot up as much as 250% in two days on the LME at the start of this week. For a while, it wasunclear which view of the market would prevail. 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. The Wall Street Journal, which previously reported the talks, also said Standard Chartered (STAN.L) and BNP Paribas (BNPP.PA) were among the banks looking to reach agreement. 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. 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. https://www.wsj.com/articles/chinese-nickel-giant-tsingshan-faces-8-billion-trading-loss-as-ukraine-war-upends-market-11646765353. And once again, this short squeeze racked up billions in losses for those involved. By now, Tsingshan wasnt the only nickel company that was strugglingjust the biggest. Tsingshan, a privately-held company, and other 'shorts' faced larger margin calls on their short bets after the LME raised the amount of money companies had to deposit with it to cover their exposure to falling nickel prices, the three sources said. The Initial Margin was $20,000 per contract. .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! As the price rose through the London day after offices in Asia had closed, Tsingshan started struggling to pay, the people say. The LME was forced to suspend nickel trading for the first time since 1988 on March 8 and is trying to facilitate negotiations to net off long and short positions in order to reopen the market. To gauge the magnitude of the problem, an unnamed source familiar with the trades told the Wall Street Journal that had the LME not cancelled those trades and allowed prices to stand at over $100,000, Tsingshan would have owed the group an estimated $15 billion. "In the course of the standstill period, Tsingshan and the consortium banks will progress discussions in relation to a standby secured liquidity facility," the company said. read more. For the LME to cancel nickel trades between willing buyers and sellers is unforgiveable. The Tsingshan Holdings Group ( Chinese: , ching-shan) is a Chinese private company active in the stainless steel and nickel industry. Then in . All quotes delayed a minimum of 15 minutes. 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. If you rely on the information on this page then you do so entirely on your own risk. 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See here for a complete list of exchanges and delays. Miners, traders, and manufacturers often use the market to make short betsthat is, to make money when prices fall. Prices had been rising for weeks amid fears of disruptions to supplies from Russia, the largest exporter of refined nickel. Still, this weeks short squeeze is nonetheless likely to push costs higher for battery companies and stainless steel makers, eventually feeding through into the price of everyday goods. The majority of retail investor accounts lose money when trading CFDs. The nickel market was anything but calm. articles a month for anyone to read, even non-subscribers! He was awakened by a phone call at 5:30 a.m. A record-breaking rally in nickel prices that led the London Metal Exchange to halt trading on Tuesday is putting increased pressure on the Chinese stainless steel producer Tsingshan and its billionaire co-founder. A Glencore spokesman declined to comment. If nickel prices stay lofty it could complicate the energy transition with electric vehicle batteries costing more to produce. The big fear was that Tsingshan would struggle to make margin calls with its bankers, potentially facing billions of dollars in losses. Indeed, Russia is the worlds third-biggest nickel producer after Indonesia and the Philippines. Short-covering trades made last week by the Chinese billionaire contributed to a swift, huge surge. Creditors and banks who acted for Tsingshan were demanding margin settlements and the closing of all positions. He started increasing his short position on the London Metal Exchange. document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Copyright International Banker 2023 | All Rights Reserved Subscription | About us | Still, contracts on the LME are backed by physical metal in a network of warehouses around the world, providing a direct link with the real-world metals industry. For non-personal use or to order multiple copies, please contact The LMEs special committee held another call at about 6 a.m. Now they recognized that they had tosuspend trading. 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) in a move that could help calm markets.. During the standstill agreement, the company and banks will discuss a standby secured liquidity facility, Tsingshan said. Xiang Guangda, the actual controller of Tsingshan, believes that the entry of so much nickel into the market will bring nickel prices down. When it was flying towards US$100,000, you could feel the damage, and you knew companies were fighting for their existence, says John Browning, founding partner of brokerage Bands Financial Ltd. and a former LME board member. The company, sitting on $8 billion in trading losses, said Wednesday it had secured enough metal to settle all its loss-making positions, according to a state-run media outlet. Still, the LME has weathered numerousscandalsbefore in its 145-year history, from a 1985crisis in the tin marketthat caused many brokers to go out of business to the incident when a trader at Sumitomo hid more than US$2 billion in losses. Already at an all-time high by 5:42 a.m., it lurched higher in stomach-churning leaps, soaring US$30,000 in a matter of minutes. The LME nickel short squeeze was created by Chinese stainless-steel producer Tsingshan as it built up massive short positions for the metal, and its margin calls spike in-line with the surge in nickel prices in March. The paper loss stood at $8 billion on Monday, before violent moves in nickel prices led the London Metal Exchange to suspend trading in the metal on Tuesday, one of the people said. This will allow the trader to buy the security back at a lower price, return it to the lender and hopefully pocket a handsome profit. 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 . Those payments have now been made, a person familiar with the matter said on Tuesday. 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. A key ingredient of stainless steel and electric vehicle batteries costing more to produce ton, and manufacturers use... Past decade, theyd traded between US $ 80,000 nickel price Tsingshan & # ;. Liability company with company number 209236B losses would number in the billions of dollars standby secured liquidity,. 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