Traders must deposit cash, known as margin, with their brokers on a regular basis to cover potential losses on their positions. Is the Strength of Big Tech Regulation Sufficient at Present? Save my name, email, and website in this browser for the next time I comment. Indeed, Russia is the worlds third-biggest nickel producer after Indonesia and the Philippines. This report studies the Ferronickel market, covering market size for segment by type (Ferronickel (Nickel15%), Ferronickel (Nickel15-25%), etc. Xiang Guangda -- who controls the world's largest nickel producer, Tsingshan Holding Group Co., and is known as "Big Shot" in Chinese commodity circles -- has closed out part of his company's short position and is considering whether to exit the wager altogether, the people said. Metal industry sources said that for the duration of the standstill agreement Tsingshan, the world's largest nickel producer, may not have to buy any more metal to cover its short positions. document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Copyright International Banker 2023 | All Rights Reserved Subscription | About us | read most from bloomberg Is the US Finally Warming to the Possibility of Creating a CBDC? Tsingshan sold 200,000 ton March 2023 contracts at price of $20 per kilo. By now, Tsingshan wasnt the only nickel company that was strugglingjust the biggest. Just after 6 a.m., the price of nickel passed US$100,000 a ton. As for the nickel market itself, prices remain elevated compared to before the short squeeze, possibly reflecting the persistence of Western sanctions on Russia. UNFORGIVEABLE,tweetedMark Thompson, a former trader at Trafigura and Apollo. Browse an unrivalled portfolio of real-time and historical market data and insights from worldwide sources and experts. It also doesn't create waste and may help fight the climate crisis. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 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. 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. 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. You should do your own research, looking at the latest news, technical analysis, and analyst commentary before trading. ), by sales channel (Direct Channel, Distribution Channel), by player (Shandong Xinhai Technology, Tsingshan Holding Group, Eramet, Linyi Yichen Alloy, Jiangsu Delong Nickel Industry . All quotes delayed a minimum of 15 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. "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. 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. 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 contribution of a dab has been 44 million to . 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. That would come on top of any losses incurred by the tycoon since he began building the short position late last year through closely held Tsingshan. The unprecedented rally prompted the 145-year-old exchange to suspend nickel trading Tuesday. The price continued to climb higher as one of the world's largest nickel producers, Russia decided to invade Ukraine. https://www.wsj.com/articles/nickel-market-crisis-sends-london-metal-exchange-scrambling-to-prevent-damage-11646858558. The fear was that Tsingshan could not make its margin calls, interim payments to parties on the other side of the trade. Li Huan/Red Star News/VCG via Getty Images. .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! Others in the market may also push up prices in anticipation of that short covering. Beijing is supportive of him, Xiang told contacts recently. Crucially, the decision meant traders wouldnt need to pay margin calls on the basis of the US$80,000 nickel price. Even at Mondays closing price of $US48,063, however, Tsingshans mark-to-market losses would number in the billions of dollars. See here for a complete list of exchanges and delays. The giant commodity trader Glencore Plc also had a position on the LME that would benefit from rising prices. Then, as now, a key factor was the intervention of the exchange. Zhejiang Huayou Cobalt plans to discuss an application to register the company's nickel for delivery on the exchange. You should never trade more than you can afford to lose. 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. 4.3 Global Ferro Nickel Sales Volume, Revenue, Price and Gross Margin (2016-2022) 4.4 United States Ferro Nickel Sales Volume, Revenue, Price and Gross Margin (2016-2022) The price spike left Tsingshan exposed to $8 billion USD of trading losses whilst struggling to meet their margin calls. Privacy Policy | Keep in mind that past performance is no guarantee of future returns. Tsingshan, the world's largest stainless steel producer, is rumoured to have built a big short position in nickel before a 250% rally in [] Our Standards: The Thomson Reuters Trust Principles. 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. This created an unprecedented LME nickel short squeeze. A week earlier, nickel was trading around $25,000 and the price of the metal has more than quadrupled in a matter of days. 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. 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. 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. Those payments have now been made, a person familiar with the matter said on Tuesday. The Morowali park mainly produces nickel pig iron for stainless steel. Pleased to report an extremely strong year for the Nickel Industries and the. See here for a complete list of exchanges and delays. 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. About 50,000 tonnes of Xiang's total nickel short position of over 150,000 tonnes is held through an over-the-counter position with JP Morgan, which means Tsingshan owed the bank about US$1 . Pada titik ini, posisi short Tsingshan dibekukan. For the LME, the future isunclear. Tsingshan, among other Chinese companies, is ramping up a wave of new battery-grade nickel capacity in Indonesia. Its also one of the most important raw materials needed inmaking batteriesfor electric vehicles. read more. Tsingshan agreed standstill with JPMorgan-led group of banks, Talks continue on loan facility to backstop short position. Nickel prices have since fallen and the three-month nickel last settled at $23,371/tonne on 3 November. Our Standards: The Thomson Reuters Trust Principles. It granted extra time on March 7th to CCBI Global, a Chinese broker for Tsingshan that is a member of the LME, to raise funds from its state-owned parent, China Construction Bank, to cover. 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. He draws a comparison with Silver Thursday, the day in 1980 when an attempt bythe Hunt brothersto corner the silver market came unstuck. Prices for the metal, used in stainless steel and electric vehicle batteries, were last in that range in December. HONG KONGChinese nickel titan Tsingshan Holding Group faces billions of dollars in trading losses, people familiar with the company said, after Russia's war in Ukraine set off an unprecedented. Nickel prices on the LME jumped to record highs above $100,000 a tonne on March 8 as Tsingshan bought large amounts to reduce its short positions in the metal, which is used to make stainless steel and electric vehicle batteries. If the market moves against those positions, they receive a margin call requesting further funds and if they fail to pay, they can be forced to close their position. Nickel, used in stainless steel and electric-vehicle batteries, surged as much as 250% in two days to trade briefly above $100,000 a ton early Tuesday. 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. Sanctions being implemented by Western powers against Russia over the invasion of its neighbour raised immediate concerns over the global supply of nickel, a metal that is primarily used around the world to make stainless steel and batteries and of which Russia accounts for around 10 percent of global supply. 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. Reuters, the news and media division of Thomson Reuters, is the worlds largest multimedia news provider, reaching billions of people worldwide every day. Join the 500.000+ traders worldwide that chose to trade with Capital.com, Also you can contact us: 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. But its obligations dwarfed its available cash and bank credit. This is lower than Nickel Mines' expected profit margin for nickel in matte at current prices. Tsingshan, who pioneered the Rotary Kiln Electric Furnace (RKEF) process to produce low-cost nickel pig iron (NPI), is now the dominant player in the Indonesian NPI industry and a global leader in NPI processing technology, including having implemented the Argon Oxygen Decarburisation process which incorporates the direct hot charging of NPI into the stainless steel production process for a . Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents. 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. Now, people familiar with the matter say, the exchange is likely to introduce such measures as position limits and greater transparency. The difference is that nickel is a commodity that touches the entire global economy. Miners, traders, and manufacturers often use the market to make short betsthat is, to make money when prices fall. 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. 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. Exchanges. Yet the day before, the market had started to unravel, with prices rising by astunning66 per cent to US$48,078. CCBI Global Markets is another creditor, two separate sources said. Why? By now, the entire nickel industry was in crisis. Access unmatched financial data, news and content in a highly-customised workflow experience on desktop, web and mobile. LME CEO Matthew Chamberlain says suspending nickel trading and canceling the trades on the London Metal Exchange was the right decision for the sake of market stability. 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 . The LME did not put it into default, instead giving it more time to pay. 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