Xiang Guangda -- who controls the world's largest nickel producer, Tsingshan Holding Group Co., and is known as "Big Shot" in Chinese commodity circles -- has closed out part of his company's short position and is considering whether to exit the wager altogether, the people said. 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. Copyright | "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. 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. Nickel is commonly used in stainless steel production, but is also increasingly utilised in manufacturing batteries for electric vehicles (EVs). The industry leader for online information for tax, accounting and finance professionals. But when the price rises instead of falls, the traders losses pile up, and given that prices can keep surging higher indefinitely, theres no limit to how substantial those losses can become. our Subscriber Agreement and by copyright law. Its unclear whether he will get his way. 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. Others in the market may also push up prices in anticipation of that short covering. LME CEO Matthew Chamberlain says suspending nickel trading and canceling the trades on the London Metal Exchange was the right decision for the sake of market stability. Those past scandals forced reforms on the exchange. 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. 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 The difference between trading assets and CFDs. 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. Some started hurrying to buy back nickel contracts, sending the price of nickel spiraling ever higher. 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. Screen for heightened risk individual and entities globally to help uncover hidden risks in business relationships and human networks. Reuters, the news and media division of Thomson Reuters, is the worlds largest multimedia news provider, reaching billions of people worldwide every day. Nickel short interest was created by Tsingshan. By April, nickel prices began to fall below $35,000/tonne and Tsingshan began to close its short positions and settled its margin calls. 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. 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. Today, Tsingshan is the biggest nickel producer in the world, accounting for around 20% of the global market. For a while, it wasunclear which view of the market would prevail. Already at an all-time high by 5:42 a.m., it lurched higher in stomach-churning leaps, soaring US$30,000 in a matter of minutes. Plus, 60% off clearance with American Eagle promo code, Wayfair promo code: 10% off any single purchase, Kohl's promo code: 30% off for Kohl's Rewards Members, 50% off + free delivery on any order with DoorDash promo code. Tsingshan thus desperately scrambled to buy nickel to cover its short position, which only added further upward pressure on prices. Privacy Policy | Tsingshan accounted for about half that amount. Brokers, in turn, must hold margin at the clearing house, LME Clear. 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. It was 5:42 a.m. on March 8 in London when the nickel market broke. Tsingshan has been struggling to pay margin calls to its brokers, according to people familiar with the situation. Prices for the metal, used in stainless steel and electric vehicle batteries, were last in that range in December. On this day, however, metal traders across the city were glued to a screen, watching the price action on the electronic market, which was already open to accommodate Asian trading. On February 22, 2023, Yangjiang News, at the "New Track, Great Future--Qingshan S32001 Duplex Steel Channel Market Launch Conference" hosted by Qingyi Steel . Even at that level, clients of LME brokers had failed to pay some US$500 million of margin calls in relation to their short positions on the exchange, according to a person familiar with the matter. Tsingshan's 2022 nickel equivalent output is . Keep in mind that past performance is no guarantee of future returns. It did not provide any other details, such as how long the standstill period would last. Bloomberg: Balance of Power focuses on the politics and policies being shaped by the agenda of President Biden's administration. LME brokers and their clients were hit with margin call after margin call. 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. Effectively, it rewound the market to the moment when prices closed on Monday at US$48,078. 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. Xiang Guangda, the actual controller of Tsingshan, believes that the entry of so much nickel into the market will bring nickel prices down. This will allow the trader to buy the security back at a lower price, return it to the lender and hopefully pocket a handsome profit. .css-16c7pto-SnippetSignInLink{-webkit-text-decoration:underline;text-decoration:underline;cursor:pointer;}Sign In, Copyright 2023 Dow Jones & Company, Inc. All Rights Reserved, Final Early Bird Pricing! Terms & Conditions Finance Publishing In the meantime, the nickel market is on ice, with traders unable to exit their positions, and many billions of dollars tied up in margin calls. It's been under growing pressure to meet the payments in recent days, the. 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. 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. Nickel short interest was created by Tsingshan. The LME convened its special committee, a small group of metals and legal experts with the power to issue emergency rules for the market. This weeks spike in prices has played out principally on the LME, and many traders expect the price to return to more normal levels once the margin call chaos has been resolved. However, for business days 7th and 8th March, they would remain at . For the LME, the future isunclear. The tycoon whose big short bet on nickel helped trigger one of the most dramatic price spikes in history has told his banks and brokers that he doesnt intend to reduce his position, according to people familiar with the matter. Most analysts sided with Xiang, at least in the medium term, believing that nickel productionled by Tsingshan and its competitors in Indonesiawould outpace demand. Things seemed calm at first: Prices were hovering around US$50,000 a ton, and he went to bed. The Morowali park mainly produces nickel pig iron for stainless steel. Bloomberg: Balance of Power focuses on the politics and policiesbeing shaped by the agenda of President Biden's administration. Nickel prices doubled on Tuesday and briefly rose above a record $100,000 a tonne as banks and brokers rushed to close part of a huge position amassed by Xiang Guangda, the billionaire founder of. Bloomberg: Balance of Power focuses on the politics and policiesbeing shaped by the agenda of President Biden's administration. 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. Nickels price moved sharply higher in the week after Russias invasion. If you are considering investing or trading nickel, its important to do your own research. articles a month for anyone to read, even non-subscribers! This exact scenario emerged in early March in the LMEs nickel market following the escalation of the Russia-Ukraine military conflict, with Chinese nickel-maker Tsingshan Holding Group the unfortunate short seller in this episode. Bloomberg: Balance of Power focuses on the politics and policies being shaped by the agenda of President Biden's administration. NIC's operations and cash flow remained stable in 2022 despite Tsingshan's significant loss on its nickel short position in March 2022. As such, if Tsingshan can weather the losses on its LME positions, the higher prices could yet benefit its core business of producing nickel and stainless steel. Its been under growing pressure to meet the payments in recent days, the people said. They held a hurried call on Monday evening, but decided to allow the nickel market to continue trading. Nikel Terbang, Pemilik Smelter RI Asal China Rugi Rp 115 T. Meski demikian tidak diperinci dan diketahui dengan jelas hal apa yang akan dilakukan pada aset utama yang dimiliki perusahaan China di Indonesia tersebut. Build the strongest argument relying on authoritative content, attorney-editor expertise, and industry defining technology. See here for a complete list of exchanges and delays. For the LME to cancel nickel trades between willing buyers and sellers is unforgiveable. The contribution of a dab has been 44 million to . It is up nearly 400% so far this year. To limit price volatility the LME imposed daily upper and lower price limits of 15% for all its physically delivered metals. The creditors involved include both local and intentional banks, including J.P. Morgan and China Construction Bank . read more. Reuters, the news and media division of Thomson Reuters, is the worlds largest multimedia news provider, reaching billions of people worldwide every day. articles a month for anyone to read, even non-subscribers! 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. See here for a complete list of exchanges and delays. All quotes delayed a minimum of 15 minutes. Miners, traders, and manufacturers often use the market to make short betsthat is, to make money when prices fall. 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. 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. Tsingshan, a privately-held company, and other 'shorts' faced larger margin calls on their short bets after the LME raised the amount of money companies had to deposit with it to cover their exposure to falling nickel prices, the three sources said. Opinion. Mampukan Tsingshan bertahan? Financial markets are on edge after the London Metal Exchange last week granted a reprieve to the giant Chinese nickel producer, which . Tsingshan agreed standstill with JPMorgan-led group of banks, Talks continue on loan facility to backstop short position. The tightness in the market had been exacerbated by the presence of an unidentified trader who, according to exchange data, controlled somewhere between 50 per cent and 80 per cent of nickel warehouse warrants monitored by the LME as of last month. You should never trade more than you can afford to lose. Li Huan/Red Star News/VCG via Getty Images. But nothing could prepare the market for what was about to follow, with the Russia-Ukraine conflict sending prices skywards on global supply concerns. Is the Strength of Big Tech Regulation Sufficient at Present? We expect the EBITDA margin to be around . The LME nickel short squeeze. The fallout was immediate. This is lower than Nickel Mines' expected profit margin for nickel in matte at current prices. 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. Tsingshan yang dimiliki oleh swasta secara harfiah memiliki arti "gunung hijau", berbasis di kota Wenzhou di China dan memiliki . By now, Tsingshan wasnt the only nickel company that was strugglingjust the biggest. The company paid at least some of its margin calls early on Monday, according to a person familiar with the matter. And thank you everyone for your attendance on today's call for the Nickel Industries Full Year 2022 Results. Executives from Goldman Sachs Group Inc. voiced their displeasure at the decision on a call with Chamberlain. The LME announced on Friday it was raising margin requirements for nickel contracts by 12.5% to $2,250 a tonne. China's Tsingshan Holding Group has reached agreements with two companies to swap its . Tsingshan's 2022 nickel equivalent output is estimated at 850,000 tonnes. For most of the past decade, theyd traded between US$10,000 and US$20,000. read most from bloomberg 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. Only you can decide whether nickel is a good buy or not. 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While Russias nickel exports havent been targeted by sanctions, U.S. and European buyers have nonetheless sought alternatives to Russian sources. The first source said that the banks could potentially earn money on a bridge loan secured by future nickel production if Tsingshan paid them back over time as it produced nickel. Some have also warned that much of the chaos in the nickel market may not be over yet. Read on for our analysis on the recent LME nickel short squeeze and the market outlook. The arrangement will also help the pave the way for the London Metal Exchange to restart nickel trading, they said. 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. For participants in commodities exchanges, a price rally is not necessarily good news. 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. Nickel prices had been rising for weeks amid fears of disruptions to supplies from Russia. If you rely on the information on this page then you do so entirely on your own risk. At the current price of nickel, the brokers themselves wouldnt be able to pay their margin calls, they told the LME. Now they had to pay big margin calls on the exchange while receiving no margin from their client. WATCH: Trading on LME is now set to resume Wednesday. Solugen Bio has built a chemical plant that produces all manner of chemical-based products using bio-based feedstock instead of fossil fuels. Tsingshan Holding Group held the biggest short position for nickel on the LME. A Glencore spokesman declined to comment. As the market was picking up on the short squeeze of Tsingshan, the LME had decided to intervene. 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. 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. Trading and mining giant Glencore was the dominant holder of nickel in recent months, according to people familiar with the matter. 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. Tsingshan, among other Chinese companies, is ramping up a wave of new battery-grade nickel capacity in Indonesia. 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 . Those 18 minutes will haunt me, says the executive, who wasnt authorized to speak publicly. (Podcast). FY18 RESULTS, FY19 GUIDANCE AND CORPORATE PRESENTATION 22 AUGUST 2018 AGENDA Results Guidance Corporate Operations Growth Exploration Nickel Market DISCLAIMER AND FORWARD Nickel trading resumed on 16 March 2022. Credit: INF News.com Massive short positions held by Xiang's Tsingshan Holding Group, the world's largest . By now, the entire nickel industry was in crisis. Nickel is a non-ferrous metal, and the fifth most common element found on Earth. Tsingshan debacle exposes weak underbelly of LME. Jack Farchy, Alfred Cang and Mark Burton, Bloomberg News. 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. One thing is sure: If Xiang can weather the storm, Tsingshans nickel producing assets stand to benefit from the higher prices, offsetting losses from the short. 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. (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 . Short-covering trades made last week by the Chinese billionaire contributed to a swift, huge surge. 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. As the price rose through the London day after offices in Asia had closed, Tsingshan started struggling to pay, the people say.