The fear was that Tsingshan could not make its margin calls, interim payments to parties on the other side of the trade. Some started hurrying to buy back nickel contracts, sending the price of nickel spiraling ever higher. Reuters could not determine how large Tsingshan's short position currently is after it cut its exposure. Tsingshan sold 200,000 ton March 2023 contracts at price of $20 per kilo. 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. Tsingshan's nickel matte plans could be 1st step into lithium battery value chain. 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. China's Tsingshan Holding Group has reached agreements with two companies to swap its . Several large brokers got margin calls of close to US$1 billion each over the course of the day. 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. Prices for the metal, used in stainless steel and electric vehicle batteries, were last in that range in December. He draws a comparison with Silver Thursday, the day in 1980 when an attempt bythe Hunt brothersto corner the silver market came unstuck. 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. . Screen for heightened risk individual and entities globally to help uncover hidden risks in business relationships and human networks. The Companys registered office is at Bahamas Financial Centre, 3rd Floor, Shirley and Charlotte Street, P.O. 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. Xiang didnt believe the rally would last. Tsingshan agreed standstill with JPMorgan-led group of banks, Talks continue on loan facility to backstop short position. 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 Xiang's. 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. 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Investors who had booked trades during the chaotic session in the early hours of Tuesdaywere furious. Follow the topics, people and companies that matter to you. Others in the market may also push up prices in anticipation of that short covering. But nothing could prepare the market for what was about to follow, with the Russia-Ukraine conflict sending prices skywards on global supply concerns. At 1 a.m. on Tuesday, the market opened. WATCH: Trading on LME is now set to resume Wednesday. (Podcast). The LME convened its special committee, a small group of metals and legal experts with the power to issue emergency rules for the market. Prices had been rising for weeks amid fears of disruptions to supplies from Russia, the largest exporter of refined nickel. See here for a complete list of exchanges and delays. 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 material provided on this website is for information purposes only and should not be understood as an investment advice. Xiang Guangda, who controls the worlds largest nickel producer, Tsingshan Holding, and is known as Big Shot in Chinese commodity circles, has closed out part of his companys short position and is considering whether to exit the wager altogether, the people said. Its unclear whether he will get his way. The price was frozen, below the record high but still at US$80,000 a ton. Bloomberg: Balance of Power focuses on the politics and policies being shaped by the agenda of President Biden's administration. Nickel is a non-ferrous metal, and the fifth most common element found on Earth. A short squeeze is a market condition caused by massive short 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. A week earlier, nickel was trading around $25,000 and the price of the metal has more than quadrupled in a matter of days. Xiang wanted to increase Tsingshans production dramatically by producing so-callednickel matte. Assessing the Incremental Costs of Regulation and Supervision Faced by Next-Gen Operating Models for Bankers and Advisors, Macroprudential Policy and Real Estate Funds. Then in . It was a classic short squeeze, as the pain for Tsingshan, its brokers, and other shorts created a self-reinforcing cycle. An employee. 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. Tsingshan's 2022 nickel equivalent output is estimated at 850,000 tonnes. 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. Q. 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. The three-month LME nickel prices hit an intra-day high at $101,365 a metric tonne on 8 March 2022. Bloomberg: Balance of Power focuses on the politics and policiesbeing shaped by the agenda of President Biden's administration. At the current price of nickel, the brokers themselves wouldnt be able to pay their margin calls, they told the LME. Others took to social media. 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. 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 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. Why is nickel going up so drastically in a short period of time? 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. That put Tsingshans banks and brokers, which include JPMorgan Chase, BNP Paribas, and Standard Chartered,in a bind. read most from bloomberg It could be even larger than that when positions taken through intermediaries are taken into account, people separately said. They had offset their deals with Tsingshan by placing their own short positions on the LME. 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. He ranked 235th on the 2021 Hurun's China rich list, which puts his net worth closer to $4.2 . The spike was driven in large part by a short squeeze centered on Chinese tycoon Xiang Guangda, who hadamassed a big wagerthat nickel prices would fall through his company Tsingshan Holding Group Co. Build the strongest argument relying on authoritative content, attorney-editor expertise, and industry defining technology. 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. Brokers, in turn, must hold margin at the clearing house, LME Clear. This created an unprecedented LME nickel short squeeze. 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. The prices that were being seen during that Asian session were becoming disconnected from, I believe, physical reality.. Tsingshan is also a nickel miner and operates nickel pig iron mines and production facilities. 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. Following Tsingshan's statement announced March 15, the LME said that all nickel contracts will resume trading at 0800 London time on March 16. By April, nickel prices began to fall below $35,000/tonne and Tsingshan began to close its short positions and settled its margin calls. Nickel prices usually move a few hundred dollars per ton in a day. The LME at the end of the day is a physical metal market, he says. The LME nickel short squeeze. 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One of the sources said Tsingshan's bets on lower nickel prices had amounted to around 300,000 tonnes at an average price between $18,000 and $19,000 a tonne. 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Subsequent reports suggested that only one-fifth of Tsingshans total nickel exposure was visible to the exchange; the rest was held in private over-the-counter trades with banks including JPMorgan Chase, BNP Paribas, Standard Chartered and United Overseas Bank Ltd. As such, Guangda was aiming for his massive short position to dominate the market and send the LME nickel price down. Chinese entrepreneur Xiang Guangda has been caught out by nickel's price surge. Bloombergs Joe Deaux reports. You should do your own research, looking at the latest news, technical analysis, and analyst commentary before trading. Today, in addition to its electronic market, its one of the last exchanges where brokers still gather in person to yell orders at one another for part of the day. The metal is found in all our homes as a key ingredient of stainless steel. The difference is that nickel is a commodity that touches the entire global economy. Some aggrieved traders are already preparing to take legal action against the exchange. As with similar short squeezes of the past, such as those involving GameStop and Volkswagen, a short squeeze occurs when a market participant borrows a certain volume of a security and sells it, hoping that its price will fall. This is lower than Nickel Mines' expected profit margin for nickel in matte at current prices. The industry leader for online information for tax, accounting and finance professionals. 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. Many traders expect the price to return to more normal levels once the margin call chaos has been resolved. And thank you everyone for your attendance on today's call for the Nickel Industries Full Year 2022 Results. Distribution and use of this material are governed by The seeds of the epic short squeeze were sown last year, when nickel, like all commodities, was rallying from its COVID-era low. CCBI Global Markets is another creditor, two separate sources said. We expect the EBITDA margin to be around . Our Standards: The Thomson Reuters Trust Principles. Now, the traders watched with a mixture of horror and grim fascination as the price went vertical. The LME did not put it into default, instead giving it more time to pay. The company paid at least some of its margin calls early on Monday, according to a person familiar with the matter. Reuters provides business, financial, national and international news to professionals via desktop terminals, the world's media organizations, industry events and directly to consumers. Distribution and use of this material are governed by Zhejiang Huayou Cobalt plans to discuss an application to register the company's nickel for delivery on the exchange. Some have also warned that much of the chaos in the nickel market may not be over yet. A Glencore spokesman declined to comment. 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. Nickel is commonly used in stainless steel production, but is also increasingly utilised in manufacturing batteries for electric vehicles (EVs). Tsingshan's difficulties paying its margin calls have put its . 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. 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 . The price move on March 8 created a systemic risk to the market, the LME said two days later. Its also one of the most important raw materials needed inmaking batteriesfor electric vehicles. Tsingshan has been struggling to pay margin calls to its brokers, according to people familiar with the situation. Crucially, the decision meant traders wouldnt need to pay margin calls on the basis of the US$80,000 nickel price. Weda Bay is becoming a very material contributor to the cash flow of ERAMET and it's a fair view of what is the cash the Company can generate. 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. (Podcast). By now, Tsingshan wasnt the only nickel company that was strugglingjust the biggest. 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. 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. 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. 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 . Forbes places Xiang's real-time net worth at $1.2 billion. The price continued to climb higher as one of the world's largest nickel producers, Russia decided to invade Ukraine. 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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 . One of Tsingshans brokers, CCBI Global Markets, also failed to pay hundreds of millions of dollars in margin calls on its nickel positions on March 7. 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. [2] It moved into the Indonesian nickel industry in 2009. At that time of day, bleary-eyed traders are typically just glancing at prices as they swig coffee on their way to the office. Chinese nickel giant Tsingshan's hedge backfired Commodities companies of course generally benefit from higher prices for their products. Perdagangan nikel di LME dihentikan sementara sejak Selasa lalu. The major market events for the week ahead right in your inbox. On March 8,2022 price of Nickel went suddenly up $100 per kilogram . Why? 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. After trading was suspended Tuesday following an unprecedented surge in prices, the London Metal Exchange said it does not expect nickel trading to resume before March 11. In response to the crisis, the LME suspended nickel trading on 8 March and cancelled all trades executed on or after 00:00 UK time on 8 March 2022 in the inter-office market and on LMEselect (LME online trading platform) until further notice.. Neither party seems very keen on this idea, however. Tsingshan Holdings was founded in 1988 by Xiang Guangda in Wenzhou. 3.1 What is the margin call to Tsingshan? 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. Browse an unrivalled portfolio of real-time and historical market data and insights from worldwide sources and experts. Tsingshan has said it has secured facilities with its consortium banks and will exit its position in an orderly manner. Keep in mind that past performance is no guarantee of future returns. In an earlier interview with Chinese news outlet Yicai, Xiang blamed "foreigners making some moves" for nickel's price spike. The creditors involved include both local and intentional banks, including J.P. Morgan and China Construction Bank . While investors who sell stocks short want the price to drop, in commodity markets many producers, traders, and users take short positions as a hedge against losses on the physical commodities they hold in inventories. Four or five of the brokerages that are LME members would have failed, a shock that could have devastated the global metals industry. read more. 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. 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. Screen for heightened risk individual and entities globally to help uncover hidden risks in business relationships and human networks. 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