Trimegah menilai bisa. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents. The giant commodity trader Glencore Plc also had a position on the LME that would benefit from rising prices. He started increasing his short position on the London Metal Exchange. The super spike was driven by holders of short positions, including Tsingshan and its brokers, rushing to close them out. Nickel prices on the LME jumped to record highs above $100,000 a tonne on March 8 as Tsingshan bought large amounts to reduce its short positions in the metal, which is used to make stainless steel and electric vehicle batteries. Others took to social media. Founded back in 1877 and now owned by Hong Kong Exchanges & Clearing (HKEX), the LME performs a critical role in determining benchmark prices for the global metals industry and provides a liquid market venue for financial institutions to make money. He draws a comparison with Silver Thursday, the day in 1980 when an attempt bythe Hunt brothersto corner the silver market came unstuck. Financial markets are on edge after the London Metal Exchange last week granted a reprieve to the giant Chinese nickel producer, which . The Morowali park mainly produces nickel pig iron for stainless steel. The seeds of the epic short squeeze were sown last year, when nickel, like all commodities, was rallying from its COVID-era low. 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. Distribution and use of this material are governed by Some think this could herald the end of the exchange itself. Tsingshan Holdings has secured loan packages from various lenders, according to a Bloomberg report citing unnamed sources, following a record short squeeze that saw nickel prices more than double in hours earlier this week. call +44 20 3097 8888 support@capital.com. 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. 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. 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. 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. Tsingshan was betting that nickel prices would slump but instead they staged an unprecedented rally amid severe economic sanctions against Russia, a major global producer of the metal, over its invasion of Ukraine. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. If nickel prices stay lofty it could complicate the energy transition with electric vehicle batteries costing more to produce. The difference is that nickel is a commodity that touches the entire global economy. Most analysts sided with Xiang, at least in the medium term, believing that nickel productionled by Tsingshan and its competitors in Indonesiawould outpace demand. Brokers, in turn, must hold margin at the clearing house, LME Clear. 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. Tsingshan is also a nickel miner and operates nickel pig iron mines and production facilities. 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. 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. 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. 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. Continue reading your article witha WSJ subscription, Already a member? Tsingshan sold 200,000 ton March 2023 contracts at price of $20 per kilo. https://www.wsj.com/articles/chinese-nickel-giant-tsingshan-faces-8-billion-trading-loss-as-ukraine-war-upends-market-11646765353. Tsingshan, among other Chinese companies, is ramping up a wave of new battery-grade nickel capacity in Indonesia. 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 Initial Margin was $20,000 per contract. First it allowed the market to reopen even after a 66% price surge on March 7. .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! The majority of retail investor accounts lose money when trading CFDs. Chinese entrepreneur Xiang Guangda has been caught out by nickel's price surge. Reuters provides business, financial, national and international news to professionals via desktop terminals, the world's media organizations, industry events and directly to consumers. It also doesn't create waste and may help fight the climate crisis. The prices that were being seen during that Asian session were becoming disconnected from, I believe, physical reality.. Nickel, used in stainless steel and electric-vehicle batteries, surged as much as 250% in two days to trade briefly above $100,000 a ton early Tuesday. our Subscriber Agreement and by copyright law. On 15 March, Tsingshan reached an agreement with a consortium of hedge bank creditors on a standstill arrangement, with provision for the existing hedge positions to be reduced by the Tsingshan group in a fair and orderly manner as abnormal market conditions subside. 2023 Capital Com Online Investments Ltd. The LME did not put it into default, instead giving it more time to pay. 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 broker was able to settle the margin calls on Tuesday after several clients, including Tsingshan, got loans to cover their positions, one of the people said. Four or five of the brokerages that are LME members would have failed, a shock that could have devastated the global metals industry. Capital Com Online Investments Ltd is a limited liability company with company number 209236B. ), by sales channel (Direct Channel, Distribution Channel), by player (Shandong Xinhai Technology, Tsingshan Holding Group, Eramet, Linyi Yichen Alloy, Jiangsu Delong Nickel Industry . They held a hurried call on Monday evening, but decided to allow the nickel market to continue trading. 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. As of the evening of March 13, the LME had yet to announce a date for nickel trading to resume. The LMEs special committee held another call at about 6 a.m. Now they recognized that they had tosuspend trading. Copyright | 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. 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. Xiang Guangda in 2017. 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 . 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. A week earlier, nickel was trading around $25,000 and the price of the metal has more than quadrupled in a matter of days. The Chinese government may also play a role. Last chance for up to $40 off TurboTax, All Jeans + Pants 25% off! Several large brokers got margin calls of close to US$1 billion each over the course of the day. It was a classic short squeeze, as the pain for Tsingshan, its brokers, and other shorts created a self-reinforcing cycle. Nickel prices have since fallen and the three-month nickel last settled at $23,371/tonne on 3 November. Nickel trading resumed on 16 March 2022. The industry leader for online information for tax, accounting and finance professionals. 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. The arrangement will also help the pave the way for the London Metal Exchange to restart nickel trading, they said. 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. 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. read more. In late February and early March, Tsingshan, which had sales of 352 billion yuan ($56 billion) last year, paid its margin calls on time. . 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. 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. Why? Matthew Chamberlain, the LMEs chief executive officer, had stayed up to watch. 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. 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. Still, contracts on the LME are backed by physical metal in a network of warehouses around the world, providing a direct link with the real-world metals industry. Is the US Finally Warming to the Possibility of Creating a CBDC? Bloomberg: Balance of Power focuses on the politics and policiesbeing shaped by the agenda of President Biden's administration. Creditors and banks who acted for Tsingshan were demanding margin settlements and the closing of all positions. Opinion. For a while, it wasunclear which view of the market would prevail. Tsingshan has been finding it difficult to pay margin calls to its creditors, the report said. 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. It had sold nickel forward on the markets, betting on the price going down, not up. Despite that, reserves that can be economically mined are limited. 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. 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. 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. For participants in commodities exchanges, a price rally is not necessarily good news. See here for a complete list of exchanges and delays. Continue reading your article witha WSJ subscription, Already a member? Chinese nickel giant Tsingshan's hedge backfired Commodities companies of course generally benefit from higher prices for their products. read more. 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. read more. Soon Chamberlain and other executives at the exchange began receiving frantic phone calls from LME brokers. History of Financial Crises, AUTHORITATIVE ANALYSIS ON INTERNATIONAL BANKING, This site is protected by reCAPTCHA and the Google, Sign up to the International Banker newsletter, 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, 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. 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. Beijing is supportive of him, Xiang told contacts recently. Nickels 250 per cent price spike in little more than 24 hours plunged the industry into chaos, triggering billions of dollars in losses for traders who bet the wrong way and leading the London Metal Exchange to suspend trading for the first time in three decades. 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. The creditors involved include both local and intentional banks, including J.P. Morgan and China Construction Bank . 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. It did not provide any other details, such as how long the standstill period would last. Singapore | A Chinese tycoon who built a massive short position in nickel futures is facing billions of dollars in mark-to-market losses after this weeks unprecedented price spike, according to people familiar with the matter. Tsingshan has been finding it difficult to pay margin calls to its creditors, the report said. We do not make any representations or warranty on the accuracy or completeness of the information that is provided on this page. 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 sometimes cancel trades when technology glitches or fat fingers cause one-off mistakes. Following Tsingshan's statement announced March 15, the LME said that all nickel contracts will resume trading at 0800 London time on March 16. Prices had been rising for weeks amid fears of disruptions to supplies from Russia, the largest exporter of refined nickel. Traders must deposit cash, known as margin, with their brokers on a regular basis to cover potential losses on their positions. A short squeeze is a market condition caused by massive short positions. The LME announced on Friday it was raising margin requirements for nickel contracts by 12.5% to $2,250 a tonne. 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. 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. Keep in mind that past performance is no guarantee of future returns. The LME nickel short squeeze. Undeterred, the Chinese tycoon has told banks he wants tomaintain his position, and has asked them to keep funding him despite the losses. 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. Xiang wanted to increase Tsingshans production dramatically by producing so-callednickel matte. 3.1 What is the margin call to Tsingshan? The LME suspended trading in nickel on Tuesday morning after one of the most dramatic price spikes in commodity market history. Follow the topics, people and companies that matter to you. That put Tsingshans banks and brokers, which include JPMorgan Chase, BNP Paribas, and Standard Chartered,in a bind. Many traders expect the price to return to more normal levels once the margin call chaos has been resolved. "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 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. Tsingshan Holding Group held the biggest short position for nickel on the LME. All quotes delayed a minimum of 15 minutes. 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. Its been under growing pressure to meet the payments in recent days, the people said. The fear was that Tsingshan could not make its margin calls, interim payments to parties on the other side of the trade. Browse an unrivalled portfolio of real-time and historical market data and insights from worldwide sources and experts. Those 18 minutes will haunt me, says the executive, who wasnt authorized to speak publicly. 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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. Advertise | Careers | Editorial Guidelines | But now, serious questions are being raised over the LMEs lack of foresight in not anticipating this incident, especially given the sheer size of Tsingshans short position, which it began to compile last year. The LME at the end of the day is a physical metal market, he says. 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. Bloomberg: Balance of Power focuses on the politics and policiesbeing shaped by the agenda of President Biden's administration. 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. 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. . This was the most disorderly move in a metal Ive seen in my career, says Mark Hansen, chief executive officer of trading house Concord Resources Ltd. We had a frenzy based on speculation that accelerated on Monday and Tuesday. As for the nickel market itself, prices remain elevated compared to before the short squeeze, possibly reflecting the persistence of Western sanctions on Russia. Solugen Bio has built a chemical plant that produces all manner of chemical-based products using bio-based feedstock instead of fossil fuels. Based on the close on Friday night at $29,130, the LME were raising initial margins to a prudent 7.72% of the contract value. Then on March 7, nickels price began its parabolic ascent, surging from US$30,000 a ton to more than US$50,000. It should be mentioned that nickel had already rallied to $25,000 in January before easing off by the end of the month. On February 22, 2023, Yangjiang News, at the "New Track, Great Future--Qingshan S32001 Duplex Steel Channel Market Launch Conference" hosted by Qingyi Steel Tsingshan is also NIC's majority shareholder with a 21.15% stake through Shanghai Decent Investment. 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. Reuters provides business, financial, national and international news to professionals via desktop terminals, the world's media organizations, industry events and directly to consumers. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com. 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. At the current price of nickel, the brokers themselves wouldnt be able to pay their margin calls, they told the LME. Privacy Policy | Assessing the Incremental Costs of Regulation and Supervision Faced by Next-Gen Operating Models for Bankers and Advisors, Macroprudential Policy and Real Estate Funds. Its unclear whether he will get his way. You should do your own research, looking at the latest news, technical analysis, and analyst commentary before trading. Everything changed when Russia invaded Ukraine. (Podcast). 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