But this week the rally became a melt-up, with prices surging as much as 250 per cent in little more than 24 hours, to an all-time high of $US101,365 a tonne. Credit: INF News.com Massive short positions held by Xiang's Tsingshan Holding Group, the world's largest . 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 . We expect the EBITDA margin to be around . 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. The exchange had serious concerns about the ability of market participants to meet their resulting margin calls, raising the significant risk of multiple defaults. Despite that, Chamberlaininsisted to Bloomberg TVon March 9 that the solvency of the LME itself was never in doubt. 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. Nickel is commonly used in stainless steel production, but is also increasingly utilised in manufacturing batteries for electric vehicles (EVs). Nickel prices usually move a few hundred dollars per ton in a day. Assessing the Incremental Costs of Regulation and Supervision Faced by Next-Gen Operating Models for Bankers and Advisors, Macroprudential Policy and Real Estate Funds. Then, as now, a key factor was the intervention of the exchange. For the LME to cancel nickel trades between willing buyers and sellers is unforgiveable. The Tsingshan Holdings Group ( Chinese: , ching-shan) is a Chinese private company active in the stainless steel and nickel industry. 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. Some think this could herald the end of the exchange itself. And when those wagers move violently in the opposite direction, they can be hit with huge margin calls, or requests to put down more cash to back their trades. 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. 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. Short-covering trades made last week by the Chinese billionaire contributed to a swift, huge surge. Creditors and banks who acted for Tsingshan were demanding margin settlements and the closing of all positions. 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 . This report studies the Ferronickel market, covering market size for segment by type (Ferronickel (Nickel15%), Ferronickel (Nickel15-25%), etc. 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. Its also one of the most important raw materials needed inmaking batteriesfor electric vehicles. 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. Only you can decide whether nickel is a good buy or not. Not everyone shared his pessimism about prices. WATCH: Trading on LME is now set to resume Wednesday. The Companys registered office is at Bahamas Financial Centre, 3rd Floor, Shirley and Charlotte Street, P.O. It also doesn't create waste and may help fight the climate crisis. 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. ), by application (Stainless Steel Industry, Electronics Industry, etc. 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. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents. It could be even larger than that when positions taken through intermediaries are taken into account, people separately said. The extra charge kicks in at close of business on Tuesday. Mampukan Tsingshan bertahan? 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. According to industry members association International Nickel Study Group (INSG), stainless steel production accounts for over two-third of nickel demand in 2020, while the use in batteries for EVs remained low at 6%. The price continued to climb higher as one of the world's largest nickel producers, Russia decided to invade Ukraine. Tsingshan has been struggling to pay margin calls to its brokers, according to people familiar with the situation. Now they had to pay big margin calls on the exchange while receiving no margin from their client. 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Access unmatched financial data, news and content in a highly-customised workflow experience on desktop, web and mobile. Exchanges. . 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. Comparable-store sales rose 19.3% in fiscal 2020 and grew another 14.4% year over year in the first nine months of 2021. Tsingshan debacle exposes weak underbelly of LME. 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. One of Tsingshans brokers, CCBI Global Markets, also failed to pay hundreds of millions of dollars in margin calls on its nickel positions on March 7. Creditors and banks who acted for Tsingshan were demanding margin settlements and the closing of all positions. 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.. (Podcast). The new historic high is nearly twice the previous record of $51,600 in 2007. Bloomberg: Balance of Power focuses on the politics and policiesbeing shaped by the agenda of President Biden's administration. Despite that, reserves that can be economically mined are limited. 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 industry leader for online information for tax, accounting and finance professionals. The current events are unprecedented, LME said in a notice. If the market moves against those positions, they receive a margin call requesting further funds and if they fail to pay, they can be forced to close their position. 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. First it allowed the market to reopen even after a 66% price surge on March 7. This is lower than Nickel Mines' expected profit margin for nickel in matte at current prices. At that time of day, bleary-eyed traders are typically just glancing at prices as they swig coffee on their way to the office. Mr Xiang began building the short position in part because he wanted to hedge rising output, but also because he believed the rally in nickel prices would fade this year. Four or five of the brokerages that are LME members would have failed, a shock that could have devastated the global metals industry. 2023 Capital Com Online Investments Ltd. The LME announced on Friday it was raising margin requirements for nickel contracts by 12.5% to $2,250 a tonne. They had offset their deals with Tsingshan by placing their own short positions on the LME. Tsingshan accounted for about half that amount. 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. Browse an unrivalled portfolio of real-time and historical market data and insights from worldwide sources and experts. LME brokers and their clients were hit with margin call after margin call. 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. Tsingshan's 2022 nickel equivalent output is . You should do your own research, looking at the latest news, technical analysis, and analyst commentary before trading. By April, nickel prices began to fall below $35,000/tonne and Tsingshan began to close its short positions and settled its margin calls. Why is nickel going up so drastically in a short period of time? read most from bloomberg 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. Privacy Policy | Most market participants expect nickel prices to come back down once the crisis around Xiangs position has been resolved. Reuters provides business, financial, national and international news to professionals via desktop terminals, the world's media organizations, industry events and directly to consumers. 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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. The fear was that Tsingshan could not make its margin calls, interim payments to parties on the other side of the trade. 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.. Among them were some of the biggest names on Wall Street. 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. Moscow's invasion of Ukraine and the west's moves to sanction Russia, a key major supplier, have electrified an already bullish nickel market. 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. Many traders expect the price to return to more normal levels once the margin call chaos has been resolved. But nothing could prepare the market for what was about to follow, with the Russia-Ukraine conflict sending prices skywards on global supply concerns. 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. Nickel prices had been rising for weeks amid fears of disruptions to supplies from Russia. Reuters, the news and media division of Thomson Reuters, is the worlds largest multimedia news provider, reaching billions of people worldwide every day. Why? Erin Jonasson. Neither party seems very keen on this idea, however. 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. 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. Continue reading your article witha WSJ subscription, Already a member? Copyright | Tsingshan sold 200,000 ton March 2023 contracts at price of $20 per kilo. Its unclear whether he will get his way. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. If you are considering investing or trading nickel, its important to do your own research. [2] It moved into the Indonesian nickel industry in 2009. ", Britain's Financial Conduct Authority (FCA) and the Bank of England are talking to the London Metal Exchange about the resumption of a fair and orderly market in nickel, the FCA said on Monday in response to a request for comment. People forgot that this isnt a video game retailer; its an important physical commodity.. A week earlier, nickel was trading around $25,000 and the price of the metal has more than quadrupled in a matter of days. 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. As of the evening of March 13, the LME had yet to announce a date for nickel trading to resume. 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. Mr Xiang told Chinese news outlet Yicai that Tsingshan did not have any problems with its nickel trading. 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 . Tsingshan has said it has secured facilities with its consortium banks and will exit its position in an orderly manner. 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. 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. For the fourth quarter, the company expects to generate "high single-digit. The creditors involved include both local and intentional banks, including J.P. Morgan and China Construction Bank . 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. 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 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. 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. Pleased to report an extremely strong year for the Nickel Industries and the. Sanctions being implemented by Western powers against Russia over the invasion of its neighbour raised immediate concerns over the global supply of nickel, a metal that is primarily used around the world to make stainless steel and batteries and of which Russia accounts for around 10 percent of global supply. Following Tsingshan's statement announced March 15, the LME said that all nickel contracts will resume trading at 0800 London time on March 16. It was a classic short squeeze, as the pain for Tsingshan, its brokers, and other shorts created a self-reinforcing cycle. 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. The LMEs special committee held another call at about 6 a.m. Now they recognized that they had tosuspend trading. . Q. Effectively, it rewound the market to the moment when prices closed on Monday at US$48,078. 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. 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. Nickel short interest was created by Tsingshan. Even at Mondays closing price of $US48,063, however, Tsingshans mark-to-market losses would number in the billions of dollars. Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com. CCBI Global Markets is another creditor, two separate sources said. 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. 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. For non-personal use or to order multiple copies, please contact 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. NIC's operations and cash flow remained stable in 2022 despite Tsingshan's significant loss on its nickel short position in March 2022. Some hedge funds were buying nickel contracts in a bet on the electric vehicle boom. JPMorgan Chase & Co (JPM.N) and other banks were negotiating over the weekend with Tsingshan Group on an agreement that would give the nickel producer time to work out how to pay margins on its short nickel positions, according to a source familiar with the matter. read more. Just after 6 a.m., the price of nickel passed US$100,000 a ton. Xiang shrugged off suggestions to reduce short positions, Tsingshans nickel short position stood at about 150,000 tons. Nickel short interest was created by Tsingshan. 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. 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. read more. This copy is for your personal, non-commercial use only. .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 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 . The Morowali park mainly produces nickel pig iron for stainless steel. Soon Chamberlain and other executives at the exchange began receiving frantic phone calls from LME brokers. The unprecedented rally prompted the 145-year-old exchange to suspend nickel trading Tuesday. A short squeeze is a market condition caused by massive short positions. Li Huan/Red Star News/VCG via Getty Images. Traders must deposit cash,. losed Joint Stock Company FinTech Solutions. Traders must deposit cash, known as margin, with their brokers on a regular basis to cover potential losses on their positions. The majority of retail investor accounts lose money when trading CFDs. Tsingshan and the LME declined to comment. Capital Com Online Investments Ltd is a limited liability company with company number 209236B. In late February and early March, Tsingshan, which had sales of 352 billion yuan ($56 billion) last year, paid its margin calls on time. Tsingshan is also a nickel miner and operates nickel pig iron mines and production facilities. 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. 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. document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Copyright International Banker 2023 | All Rights Reserved Subscription | About us | Late Tuesday, the exchange said it anticipates trading wont resume before Friday. call +44 20 3097 8888 support@capital.com. Nickel prices have since fallen and the three-month nickel last settled at $23,371/tonne on 3 November. See here for a complete list of exchanges and delays. When it was flying towards US$100,000, you could feel the damage, and you knew companies were fighting for their existence, says John Browning, founding partner of brokerage Bands Financial Ltd. and a former LME board member. The material provided on this website is for information purposes only and should not be understood as an investment advice. 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 And never trade money that you cannot afford to lose. 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 . . An employee. Now, the traders watched with a mixture of horror and grim fascination as the price went vertical. 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 . It should be mentioned that nickel had already rallied to $25,000 in January before easing off by the end of the month. 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 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. 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. Tsingshan is also NIC's majority shareholder with a 21.15% stake through Shanghai Decent Investment. Now, people familiar with the matter say, the exchange is likely to introduce such measures as position limits and greater transparency.

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