Known as "Big Shot" in China for his imposing presence in the metal industry, Xiang Guangda, the founder of the world's 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 Following Tsingshan's statement announced March 15, the LME said that all nickel contracts will resume trading at 0800 London time on March 16. 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. It had sold nickel forward on the markets, betting on the price going down, not up. 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. Bloombergs Joe Deaux reports. In an earlier interview with Chinese news outlet Yicai, Xiang blamed "foreigners making some moves" for nickel's price spike. Some started hurrying to buy back nickel contracts, sending the price of nickel spiraling ever higher. Jack Farchy, Alfred Cang and Mark Burton, Bloomberg News. It could be even larger than that when positions taken through intermediaries are taken into account, people separately said. 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. Undeterred, the Chinese tycoon has told banks he wants tomaintain his position, and has asked them to keep funding him despite the losses. Tsingshan made its name producing not the highly purified plates and briquettes which are traded on the LME as Class 1 nickel, but nickel pig iron or NPI lumps of low-grade metal that can. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Tsingshan has been struggling to pay margin calls to its brokers, according to people familiar with the situation. The Companys registered office is at Bahamas Financial Centre, 3rd Floor, Shirley and Charlotte Street, P.O. Its also one of the most important raw materials needed inmaking batteriesfor electric vehicles. 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. The new historic high is nearly twice the previous record of $51,600 in 2007. That might have taken down some of the LME 's member-brokers. 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. 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.. Nevertheless, the short squeeze did trigger a whopping $8 billion margin call on Guangda. 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. 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. Several large brokers got margin calls of close to US$1 billion each over the course of the day. 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'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. A week earlier, nickel was trading around $25,000 and the price of the metal has more than quadrupled in a matter of days. Pleased to report an extremely strong year for the Nickel Industries and the. The fallout was immediate. 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 . But the effects of the short squeeze are likely to be felt in other ways. By now, the entire nickel industry was in crisis. 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 . He started increasing his short position on the London Metal Exchange. 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. Russia is the worlds third-largest producer of nickel and its largest exporter of refined nickel metalthe type deliverable on the LME. For the LME to cancel nickel trades between willing buyers and sellers is unforgiveable. Remember, when prices move up, traders like Xiang who have sold futures contracts face margin calls; they must put up more cash to cover potential losses. And thank you everyone for your attendance on today's call for the Nickel Industries Full Year 2022 Results. NIC's operations and cash flow remained stable in 2022 despite Tsingshan's significant loss on its nickel short position in March 2022. See here for a complete list of exchanges and delays. Why is nickel going up so drastically in a short period of time? 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. 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. Privacy Policy | Assessing the Incremental Costs of Regulation and Supervision Faced by EU Banks Compared to Their US Peers, Interview with Mr. lvaro Saboro, Chief Executive Officer, Grupo Financiero BCT. 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. 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. On February 22, 2023, Yangjiang News, at the "New Track, Great Future--Qingshan S32001 Duplex Steel Channel Market Launch Conference" hosted by Qingyi Steel Xiang shrugged off suggestions to reduce short positions, Tsingshans nickel short position stood at about 150,000 tons. 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. 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. Advertise | Careers | Editorial Guidelines | In recent days, Tsingshan has been under growing pressure from its brokers to meet margin calls on that position - a market dynamic which has helped to drive prices ever higher. document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Copyright International Banker 2023 | All Rights Reserved Subscription | About us | Its unclear whether he will get his way. You should never trade more than you can afford to lose. 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 big fear was that Tsingshan would struggle to make margin calls with its bankers, potentially facing billions of dollars in losses. 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. Why? And that was just for the portion of the short position it held directly on the exchangeabout 30,000 tons. The difference between trading assets and CFDs. Solugen Bio has built a chemical plant that produces all manner of chemical-based products using bio-based feedstock instead of fossil fuels. 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. A short position is created when a trader sells a security he does not own, with the intention of repurchasing it later at a lower price. https://www.wsj.com/articles/chinese-nickel-giant-tsingshan-faces-8-billion-trading-loss-as-ukraine-war-upends-market-11646765353. Bloomberg: Balance of Power focuses on the politics and policiesbeing shaped by the agenda of President Biden's administration. 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. 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. Despite that, reserves that can be economically mined are limited. Continue reading your article witha WSJ subscription, Already a member? Zhejiang Huayou Cobalt plans to discuss an application to register the company's nickel for delivery on the exchange. Tsingshan has been finding it difficult to pay margin calls to its creditors, the report said. Tsingshan was unable meet margin calls and only avoided bankruptcy after . 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. 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 . Prices for the metal, used in stainless steel and electric vehicle batteries, were last in that range in December. 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Build the strongest argument relying on authoritative content, attorney-editor expertise, and industry defining technology. But since last year, Tsingshan has also started to produce a source of nickel for batteries. 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 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. 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. Indeed, reports suggest that a number of investors are now preparing lawsuits, while the LMEs regulator, the Financial Conduct Authority (FCA), is expected to investigate the incident. 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. 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) Why bet against nickel when you have a nickel business? Exchanges. A Glencore spokesman declined to comment. 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