Xiang didnt believe the rally would last. 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. Our Standards: The Thomson Reuters Trust Principles. .css-16c7pto-SnippetSignInLink{-webkit-text-decoration:underline;text-decoration:underline;cursor:pointer;}Sign In, Copyright 2023 Dow Jones & Company, Inc. All Rights Reserved, 50% off + free delivery on any order with DoorDash promo code, Wayfair promo code: 10% off any single purchase, 60% off running shoes and apparel at Nike without a promo code, March Flash Sale: Extra 30% Off w/ Groupon Promo Code. For the fourth quarter, the company expects to generate "high single-digit. At 8:15 a.m., the screens stopped flashing, hours before the in-person pit trading session was even set to begin. The LME suspended trading in nickel on Tuesday morning after one of the most dramatic price spikes in commodity market history. UNFORGIVEABLE,tweetedMark Thompson, a former trader at Trafigura and Apollo. Distribution and use of this material are governed by 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. 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 short interest was created by Tsingshan. It could be even larger than that when positions taken through intermediaries are taken into account, people separately said. The head of one London metals brokerage recalls feeling sick as he watched the moves, realizing what the spike in prices would mean for his company, the market, and the global metals industry. The XM Research Desk, manned by market expert professionals, provides live daily updates on all the major events of the global markets in the form of market reviews, forex news, technical analysis, investment topics, daily outlook and daily vidoes. Tsingshans were even larger, numbering roughly US$3 billion, according to a Bloomberg calculation based on the companys total short positionwhich, even after Xiang had closed out a portion of the bet in previous weeks, was over 150,000 tons. At that time of day, bleary-eyed traders are typically just glancing at prices as they swig coffee on their way to the office. The creditors involved include both local and intentional banks, including J.P. Morgan and China Construction Bank . For participants in commodities exchanges, a price rally is not necessarily good news. Tsingshan is also NIC's majority shareholder with a 21.15% stake through Shanghai Decent Investment. Given that JPMorgan was reported as the biggest trading counterparty against which Tsingshans nickel trades were made, the US bank led the subsequent agreement to arrange a rescue credit facility, secured from various lenders, including China Construction Bank (CCB), to help the Chinese nickel giant address its immediate liquidity squeeze. Tsingshan yang dimiliki oleh swasta secara harfiah memiliki arti "gunung hijau", berbasis di kota Wenzhou di China dan memiliki . The exchange had serious concerns about the ability of market participants to meet their resulting margin calls, raising the significant risk of multiple defaults. Despite that, Chamberlaininsisted to Bloomberg TVon March 9 that the solvency of the LME itself was never in doubt. 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. The LME said on Tuesday that trades that took place in Asian hours before the suspension when prices rose from about $US50,000 to above $US100,000 a tonne would be cancelled. Short-covering trades made last week by the Chinese billionaire contributed to a swift, huge surge. 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. Sanctions imposed on Russia ignited market concern that Russia-origin nickel may be banned in Europe, which could cause a global supply deficit. Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com. Why bet against nickel when you have a nickel business? Then on March 7, nickel's price began its parabolic. 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. Three-month nickel on the LME more than doubled to over $100,000 a ton yesterday before the LME stepped in to halt trading of the metal. And when those wagers move violently in the opposite direction, they can be hit with huge margin calls, or requests to put down more cash to back their trades. . 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. read more. Reuters could not determine how large Tsingshan's short position currently is after it cut its exposure. Tsingshan thus desperately scrambled to buy nickel to cover its short position, which only added further upward pressure on prices. 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. Many producers, traders, and users of nickel with short positions on the LME were facing margin calls many times larger than they were prepared for. The fallout was immediate. By April, nickel prices began to fall below $35,000/tonne and Tsingshan began to close its short positions and settled its margin calls. He was awakened by a phone call at 5:30 a.m. ), by sales channel (Direct Channel, Distribution Channel), by player (Shandong Xinhai Technology, Tsingshan Holding Group, Eramet, Linyi Yichen Alloy, Jiangsu Delong Nickel Industry . Bloomberg: Balance of Power focuses on the politics and policiesbeing shaped by the agenda of President Biden's administration. Tsingshan, the world's largest stainless steel producer, is rumoured to have built a big short position in nickel before a 250% rally in [] Keep in mind that past performance is no guarantee of future returns. our Subscriber Agreement and by copyright law. Mampukan Tsingshan bertahan? It was a classic short squeeze, as the pain for Tsingshan, its brokers, and other shorts created a self-reinforcing cycle. 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. (Podcast). Help using this website - Accessibility statement. Tsingshan and others had to buy . Save my name, email, and website in this browser for the next time I comment. The seeds of the epic short squeeze were sown last year, when nickel, like all commodities, was rallying from its COVID-era low. 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. This is lower than Nickel Mines' expected profit margin for nickel in matte at current prices. Why? 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. 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. The nickel market was anything but calm. The limits also meant that those buyers seeking to unwind their positions had to join a long queue of sellers waiting to complete their transactions. 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. Erin Jonasson. Bloomberg News' Joe Deaux reports. Those payments have now been made, a person familiar with the matter said on Tuesday. Chinese entrepreneur Xiang Guangda has been caught out by nickel's price surge. Its unclear whether he will get his way. Read on for our analysis on the recent LME nickel short squeeze and the market outlook. This is a fee deposit with a counterparty (often the brokers or exchange) to cover some of the credit risk undertaken to take a short position. 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. Tsingshan sold 200,000 ton March 2023 contracts at price of $20 per kilo. Access unmatched financial data, news and content in a highly-customised workflow experience on desktop, web and mobile. Reuters provides business, financial, national and international news to professionals via desktop terminals, the world's media organizations, industry events and directly to consumers. In an earlier interview with Chinese news outlet Yicai, Xiang blamed "foreigners making some moves" for nickel's price spike. Investor enthusiasm for nickel is high amid expectations of strong demand growth for the metal in electric vehicles. (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 . 3.1 What is the margin call to Tsingshan? Some aggrieved traders are already preparing to take legal action against the exchange. The material provided on this website is for information purposes only and should not be understood as an investment advice. The LME convened its special committee, a small group of metals and legal experts with the power to issue emergency rules for the market. "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. One resolution to the situation may be for Glencore and Xiang to strike a deal to use Glencores long positions to cancel out some of Xiangs short. 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Its participants are a mix of the industrial metals companies, which tap the market to offset their price risks, and hedge funds, which use it to speculate. Solugen Bio has built a chemical plant that produces all manner of chemical-based products using bio-based feedstock instead of fossil fuels. But the LME has defended its actions, arguing that the decisions it took were made with full regard to regulatory due process and in the interests of the market as a whole, according to a spokesman for the exchange, who spoke to UK financial-news publication City A.M. during the week after the suspension. 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. 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