That means it would have suffered much more than $US2 billion ($2.7 billion) of daily losses at the most extreme point of nickels surge. He ranked 235th on the 2021 Hurun's China rich list, which puts his net worth closer to $4.2 . 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 . Russia is the worlds third-largest producer of nickel and its largest exporter of refined nickel metalthe type deliverable on the LME. Opinion. The most comprehensive solution to manage all your complex and ever-expanding tax and compliance needs. Nickel trading resumed on 16 March 2022. Nickel prices shot up as much as 250% in two days on the LME at the start of this week. Its been under growing pressure to meet the payments in recent days, the people said. See here for a complete list of exchanges and delays. The most comprehensive solution to manage all your complex and ever-expanding tax and compliance needs. "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. Screen for heightened risk individual and entities globally to help uncover hidden risks in business relationships and human networks. Tsingshan, the world's largest stainless steel producer, is rumoured to have built a big short position in nickel before a 250% rally in [] WATCH: Trading on LME is now set to resume Wednesday. On February 22, 2023, Yangjiang News, at the "New Track, Great Future--Qingshan S32001 Duplex Steel Channel Market Launch Conference" hosted by Qingyi Steel Are you considering whether or not to trade nickel or want to learn more about the market? Undeterred, the Chinese tycoon has told banks he wants tomaintain his position, and has asked them to keep funding him despite the losses. 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. Tsingshan's difficulties paying its margin calls have put its . Join the 500.000+ traders worldwide that chose to trade with Capital.com, Also you can contact us: The paper loss stood at $8 billion on Monday, before violent moves in nickel prices led the London Metal Exchange to suspend trading in the metal on Tuesday, one of the people said. But its extremely unusual for an exchange to cancel whole sessions of trading after the fact. If you rely on the information on this page then you do so entirely on your own risk. 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. As of the evening of March 13, the LME had yet to announce a date for nickel trading to resume. Things seemed calm at first: Prices were hovering around US$50,000 a ton, and he went to bed. Reuters could not determine how large Tsingshan's short position currently is after it cut its exposure. 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. 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. (HNI) to produce higher-grade nickel matte. 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. 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. Screen for heightened risk individual and entities globally to help uncover hidden risks in business relationships and human networks. This is lower than Nickel Mines' expected profit margin for nickel in matte at current prices. Its unclear whether he will get his way. Some started hurrying to buy back nickel contracts, sending the price of nickel spiraling ever higher. Access unmatched financial data, news and content in a highly-customised workflow experience on desktop, web and mobile. 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. read more. 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. Tsingshan, among other Chinese companies, is ramping up a wave of new battery-grade nickel capacity in Indonesia. The giant commodity trader Glencore Plc also had a position on the LME that would benefit from rising prices. Reuters provides business, financial, national and international news to professionals via desktop terminals, the world's media organizations, industry events and directly to consumers. Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com. 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. By now, Tsingshan wasnt the only nickel company that was strugglingjust the biggest. He started increasing his short position on the London Metal Exchange. articles a month for anyone to read, even non-subscribers! (Podcast). In theory, any price changes on the futures market should offset price changes in the value of the inventoriesas long as the traders canmeet their margin calls. At 8:15 a.m., the screens stopped flashing, hours before the in-person pit trading session was even set to begin. It got to a point where there were things going on which were not normal market forces. Daniel Ghali, director of commodities strategy at TD Securities, meanwhile, believes the worlds pricing mechanism for nickel is failing. It should be mentioned that nickel had already rallied to $25,000 in January before easing off by the end of the month. 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Worse, the chaos was spreading to other markets: Zinc prices spiked 15 per cent in a few minutes to a record high, only to collapse again. 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 . Several large brokers got margin calls of close to US$1 billion each over the course of the day. 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. He draws a comparison with Silver Thursday, the day in 1980 when an attempt bythe Hunt brothersto corner the silver market came unstuck. 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. 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. 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. The simple fact here is that we did not have visibility over the size of the risk, Matthew Chamberlain, the LMEs chief executive, also stated. Xiang Guangda in 2017. The contribution of a dab has been 44 million to . It had sold nickel forward on the markets, betting on the price going down, not up. .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. If nickel prices stay lofty it could complicate the energy transition with electric vehicle batteries costing more to produce. Save my name, email, and website in this browser for the next time I comment. The major market events for the week ahead right in your inbox. Capital Com Online Investments Ltd is a limited liability company with company number 209236B. 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. 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. 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. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents. . 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. In an earlier interview with Chinese news outlet Yicai, Xiang blamed "foreigners making some moves" for nickel's price spike. Matthew Chamberlain speaks on "Bloomberg Markets: Europe.". The price moves exacerbated the pressure on holders of big short positions, already facing calls to deposit extra funds with brokers, a practice known in financial markets as margin calls. He was awakened by a phone call at 5:30 a.m. Not surprisingly, investors have not been particularly satisfied with the LMEs actionsor lack thereofin allowing this situation to transpire. 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. 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. 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. Indeed, Russia is the worlds third-biggest nickel producer after Indonesia and the Philippines. 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 . 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. 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. The annals of commodity markets are full of tales of producers and traders, fromMetallgesellschaftto Sumitomo, that blurred the lines between hedging and speculation and ended with billions of dollars in losses. It was a classic short squeeze, as the pain for Tsingshan, its brokers, and other shorts created a self-reinforcing cycle. Weve received a lot of phone calls today, he said. Until yesterday, it appeared that a bailout plan for Chinese stainless steel titan Tsingshan Holding Group owned by "Big Shot" Xiang Guangda (and which was facing an $8 billion nickel margin call following the explosive surge in Nickel prices which briefly soared above $100,000/ton up 4x in just a few days, or would be if the Hong Kong-owned LME ever reopened Nickel trading) was coming along . CCBI Global Markets is another creditor, two separate sources said. A sharp surge in nickel prices triggered margin call fears at the London Metal Exchange which suspended trading after prices doubled in hours. Then on March 7, nickels price began its parabolic ascent, surging from US$30,000 a ton to more than US$50,000. 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. 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. 2023 Capital Com Online Investments Ltd. 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 . 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. 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. Prices exploded, thanks mainly to one companyindeed, one man. 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. The arrangement will also help the pave the way for the London Metal Exchange to restart nickel trading, they said. Tsingshan Holdings was founded in 1988 by Xiang Guangda in Wenzhou. 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. 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. Short-covering trades made last week by the Chinese billionaire contributed to a swift, huge surge. 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. At 1 a.m. on Tuesday, the market opened. That might have taken down some of the LME 's member-brokers. 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. Nickel prices have since fallen and the three-month nickel last settled at $23,371/tonne on 3 November. Some hedge funds were buying nickel contracts in a bet on the electric vehicle boom. Pleased to report an extremely strong year for the Nickel Industries and the. 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. our Subscriber Agreement and by copyright law. 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. 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. Forbes places Xiang's real-time net worth at $1.2 billion. 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.. UNFORGIVEABLE,tweetedMark Thompson, a former trader at Trafigura and Apollo. The prices that were being seen during that Asian session were becoming disconnected from, I believe, physical reality.. While the exact scale of Mr Xiangs losses is unclear, Tsingshans short position on the London Metal Exchange is in the region of 100,000 tonnes of nickel, people familiar with the matter said. 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. Do so entirely on your own risk LME that would benefit from rising.. In this browser for the nickel Industries and the three-month nickel last at. 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