Tsingshan Holding Group held the biggest short position for nickel on the LME. ), by application (Stainless Steel Industry, Electronics Industry, etc. And thank you everyone for your attendance on today's call for the Nickel Industries Full Year 2022 Results. But its obligations dwarfed its available cash and bank credit. A consortium of hedge bank creditors that has a standstill agreement with Tsingshan agreed not to close out the positions against the company or to make further margin calls on the existing positions. By April, nickel prices began to fall below $35,000/tonne and Tsingshan began to close its short positions and settled its margin calls. 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 . Nickels price moved sharply higher in the week after Russias invasion. 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. Chinese entrepreneur Xiang Guangda has been caught out by nickel's price surge. The move is a characteristic display of self-confidence from Xiang Guangda, the owner of Tsingshan Holding Group Co., and means that the nickel market could be set for more fireworks once it reopens. 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. "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. It should be mentioned that nickel had already rallied to $25,000 in January before easing off by the end of the month. Despite that, reserves that can be economically mined are limited. 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. By now, Tsingshan wasnt the only nickel company that was strugglingjust the biggest. 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. 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. Its unclear whether he will get his way. 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.. LME brokers and their clients were hit with margin call after margin call. By early this year, it had taken ownership of more than half of the available nickel in LME warehouses. WATCH: Trading on LME is now set to resume Wednesday. This is lower than Nickel Mines' expected profit margin for nickel in matte at current prices. If you are considering investing or trading nickel, its important to do your own research. It is up nearly 400% so far this year. People familiar with the discussions said the exchange would ideally prefer to wait until Xiang has reached a resolution with his banks and brokers. Several large brokers got margin calls of close to US$1 billion each over the course of the day. 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 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. 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. Exchanges sometimes cancel trades when technology glitches or fat fingers cause one-off mistakes. 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. A short squeeze is a market condition caused by massive short positions. 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. 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. Xiangs short position has now racked upbillions of dollars in losses. 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. Tsingshan thus desperately scrambled to buy nickel to cover its short position, which only added further upward pressure on prices. (HNI) to produce higher-grade nickel matte. 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. China's Tsingshan Holding Group has reached agreements with two companies to swap its . 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. He ranked 235th on the 2021 Hurun's China rich list, which puts his net worth closer to $4.2 . 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. Exchanges. The big fear was that Tsingshan would struggle to make margin calls with its bankers, potentially facing billions of dollars in losses. However, the short position holders have to pay a margin. Join the 500.000+ traders worldwide that chose to trade with Capital.com, Also you can contact us: Yet the day before, the market had started to unravel, with prices rising by astunning66 per cent to US$48,078. President Tayyip Erdogan indicated on Wednesday that elections will be held on May 14, sticking to his previous plan for the vote with a date just over three months after a devastating earthquake killed more than 45,000 people in Turkey. All quotes delayed a minimum of 15 minutes. The difference is that nickel is a commodity that touches the entire global economy. 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Tsingshan agreed standstill with JPMorgan-led group of banks, Talks continue on loan facility to backstop short position. But to hedge against a a drop in prices, they use. articles a month for anyone to read, even non-subscribers! 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 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 . Tsingshan's difficulties paying its margin calls have put its . Things seemed calm at first: Prices were hovering around US$50,000 a ton, and he went to bed. Four or five of the brokerages that are LME members would have failed, a shock that could have devastated the global metals industry. 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 . It said the banks agreed not to make margin calls or close out their positions against Tsingshan while the company is resolving its nickel margin and settlement requirements. Distribution and use of this material are governed by Our Standards: The Thomson Reuters Trust Principles. 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. read more. Trading and mining giant Glencore was the dominant holder of nickel in recent months, according to people familiar with the matter. 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 company paid at least some of its margin calls early on Monday, according to a person familiar with the matter. Neither party seems very keen on this idea, however. That put Tsingshans banks and brokers, which include JPMorgan Chase, BNP Paribas, and Standard Chartered,in a bind. On March 8,2022 price of Nickel went suddenly up $100 per kilogram . An employee. The unprecedented rally prompted the 145-year-old exchange to suspend nickel trading Tuesday. Traders must deposit cash, known as margin, with their brokers on a regular basis to cover potential losses on their positions. The price was frozen, below the record high but still at US$80,000 a ton. Capital Com Online Investments Ltd is a Company registered in the Commonwealth of The Bahamas and authorised by the Securities Commission of The Bahamas with license number SIA-F245. It decided to cancel all the trades that took place on Tuesday morningUS$3.9 billion of them, according to a Bloomberg calculation. Tsingshan Holdings was founded in 1988 by Xiang Guangda in Wenzhou. Miners, traders, and manufacturers often use the market to make short betsthat is, to make money when prices fall. 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 . Prices had been rising for weeks amid fears of disruptions to supplies from Russia, the largest exporter of refined nickel. The major market events for the week ahead right in your inbox. 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. 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. Contact us | 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. To gauge the magnitude of the problem, an unnamed source familiar with the trades told the, 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 16, 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, 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, Manuel A. Muoz European Central Bank (ECB), Miguel Moreno Tripp EGADE Business School | Crowe Global, Flix Villatoro Universidad Adolfo Ibez Business School, Kenneth D. Simonson Associated General Contractors of America (AGC), Dalia A. Kader Commercial International Bank (CIB), Davi Ferreira Veronese University of So Paulo, Maria Paula Bertran University of So Paulo, Thanos Andrikopoulos University of Hull, Tim Johnson JB Super Yachts | TJB Private Travel. 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. "For the period of the standstill, the participating hedge banks agree not to close out positions against Tsingshan or to make further margin calls in respect of existing positions. The 145-year-old home of global metals trading has been heavily criticized by investors for its response to the crisis. 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. Tsingshan's nickel matte plans could be 1st step into lithium battery value chain. To limit price volatility the LME imposed daily upper and lower price limits of 15% for all its physically delivered metals. read more. Its nickel matte production in Indonesia is nearly 8,000 tonnes per month, according to the Shanghai Securities News. Tsingshan, the world's largest stainless steel producer, is rumoured to have built a big short position in nickel before a 250% rally in [] Are you considering whether or not to trade nickel or want to learn more about the market? Capital Com is an execution-only service provider. Tsingshan sold 200,000 ton March 2023 contracts at price of $20 per kilo. (Bloomberg) -- One of the key Chinese players in last year's nickel short squeeze is preparing to meet London Metal Exchange Chief Executive Matthew Chamberlain in the first face-to-face encounter since the crisis that upended the global metals world.Most Read from BloombergHow Biden's Shock-and-Awe Tactic Is Failing to Stop RussiaChina Cease-Fire Proposal for Ukraine Falls Flat With US . Build the strongest argument relying on authoritative content, attorney-editor expertise, and industry defining technology. Chinese nickel giant at center of action, Tsingshan, received financial lifeline from banks to help meet margin calls related to $8 billion in paper losses Since Russia invaded Ukraine at the. Just after 6 a.m., the price of nickel passed US$100,000 a ton. For the LME, the future isunclear. Soon Chamberlain and other executives at the exchange began receiving frantic phone calls from LME brokers. If nickel prices stay lofty it could complicate the energy transition with electric vehicle batteries costing more to produce. call +44 20 3097 8888 support@capital.com. It marked the first major market failure sinceRussias invasion of Ukrainejolted global markets, showing how the removal of one of the worlds largest exporters of resources from the financial system in the space of weeks is having ripple effects across the world. Copyright | The metal is found in all our homes as a key ingredient of stainless steel. Only you can decide whether nickel is a good buy or not. US manufacturing sector contracts again; raw material prices rise, U.S. House panel approves bill giving Biden power to ban TikTok, Additional reporting by Eric Onstad in London, by the Beijing newsroom and Min Zhang in Beijing; editing by Carmel Crimmins, Exclusive: Tesla readies revamp of Model Y codenamed 'Juniper', EV startups from Lucid to Rivian see demand fade, supply chain issues linger, Lilly to cut some list prices by 70% and offer $25 insulin, Exclusive: Biden administration to move on Midwest ethanol-blended gasoline rule this week -sources, Exclusive news, data and analytics for financial market professionals. 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. ), by sales channel (Direct Channel, Distribution Channel), by player (Shandong Xinhai Technology, Tsingshan Holding Group, Eramet, Linyi Yichen Alloy, Jiangsu Delong Nickel Industry . However, for business days 7th and 8th March, they would remain at . Nickel prices usually move a few hundred dollars per ton in a day. Some have also warned that much of the chaos in the nickel market may not be over yet. 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. Why? Why? And never trade money that you cannot afford to lose. As the market was picking up on the short squeeze of Tsingshan, the LME had decided to intervene. 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. 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. Bloomberg: Balance of Power focuses on the politics and policies being shaped by the agenda of President Biden's administration. According to reports, Tsingshan Group plans to produce 850,000 tons of nickel in 2022, an increase of 40% compared with the production of nearly 600,000 tons in 2021. At that time of day, bleary-eyed traders are typically just glancing at prices as they swig coffee on their way to the office. Pada titik ini, posisi short Tsingshan dibekukan. HONG KONGChinese nickel titan Tsingshan Holding Group faces billions of dollars in trading losses, people familiar with the company said, after .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;}Russias war in Ukraine set off an unprecedented rise in the price of a key metal used in stainless steel and electric-vehicle batteries. The contribution of a dab has been 44 million to . A Glencore spokesman declined to comment. 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 . 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. 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. Not surprisingly, investors have not been particularly satisfied with the LMEs actionsor lack thereofin allowing this situation to transpire. Bloomberg: Balance of Power focuses on the politics and policiesbeing shaped by the agenda of President Biden's administration. Its not clear to what extent Xiang saw his position as merely a hedge or as a speculative bet. 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. Among them were some of the biggest names on Wall Street. 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. 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 . It's been under growing pressure to meet the payments in recent days, the. One of the world's biggest nickel and stainless steel producers, Tsingshan started building a short position -- a wager that prices will fall -- in the nickel market last year. Bloomberg News' Joe Deaux reports. The London Metal Exchange plans to resume trading in nickel, a week after it was suspended when the price of the metal surged to over $100,000 a ton. Bloomberg: Balance of Power focuses on the politics and policiesbeing shaped by the agenda of President Biden's administration. It had sold nickel forward on the markets, betting on the price going down, not up. Just over a year after the historic short squeeze involving video-game retailer GameStop sent shockwaves around the financial world, a similar episode broke out in early March, this time on the London Metal Exchanges (LME) nickel market. 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. The extra charge kicks in at close of business on Tuesday. He started increasing his short position on the London Metal Exchange. Tsingshan and the LME declined to comment. 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. Several large brokers got margin calls of close to US$1 billion each over the course of the day. 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