Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com. The most comprehensive solution to manage all your complex and ever-expanding tax and compliance needs. read more. 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. Screen for heightened risk individual and entities globally to help uncover hidden risks in business relationships and human networks. Help using this website - Accessibility statement. 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. Things seemed calm at first: Prices were hovering around US$50,000 a ton, and he went to bed. Most analysts sided with Xiang, at least in the medium term, believing that nickel productionled by Tsingshan and its competitors in Indonesiawould outpace demand. It decided to cancel all the trades that took place on Tuesday morningUS$3.9 billion of them, according to a Bloomberg calculation. Last chance for up to $40 off TurboTax, All Jeans + Pants 25% off! Xiang shrugged off suggestions to reduce short positions, Tsingshans nickel short position stood at about 150,000 tons. Tsingshan's 2022 nickel equivalent output is estimated at 850,000 tonnes. Bloomberg: Balance of Power focuses on the politics and policiesbeing shaped by the agenda of President Biden's administration. The LME is now very likely going to die a slow, self-inflicted death through the loss of confidence in it and its products, predicted Thompson in a tweet. Screen for heightened risk individual and entities globally to help uncover hidden risks in business relationships and human networks. Exchanges. UNFORGIVEABLE,tweetedMark Thompson, a former trader at Trafigura and Apollo. Short-covering trades made last week by the Chinese billionaire contributed to a swift, huge surge. Opinion. The giant commodity trader Glencore Plc also had a position on the LME that would benefit from rising prices. 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. A short squeeze is a market condition caused by massive short positions. Nickel short interest was created by Tsingshan. Browse an unrivalled portfolio of real-time and historical market data and insights from worldwide sources and experts. Jack Farchy, Alfred Cang and Mark Burton, Bloomberg News. Access unmatched financial data, news and content in a highly-customised workflow experience on desktop, web and mobile. The extra charge kicks in at close of business on Tuesday. At 8:15 a.m., the screens stopped flashing, hours before the in-person pit trading session was even set to begin. Those past scandals forced reforms on the exchange. read more. 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. At 1 a.m. on Tuesday, the market opened. 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 trading resumed on 16 March 2022. One of the sources said Tsingshan's bets on lower nickel prices had amounted to around 300,000 tonnes at an average price between $18,000 and $19,000 a tonne. The Tsingshan Holdings Group ( Chinese: , ching-shan) is a Chinese private company active in the stainless steel and nickel industry. But since last year, Tsingshan has also started to produce a source of nickel for batteries. 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. China's Tsingshan Holding Group has reached agreements with two companies to swap its . 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. . Its also one of the most important raw materials needed inmaking batteriesfor electric vehicles. By now, the entire nickel industry was in crisis. https://www.wsj.com/articles/nickel-market-crisis-sends-london-metal-exchange-scrambling-to-prevent-damage-11646858558. 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 . Comparable-store sales rose 19.3% in fiscal 2020 and grew another 14.4% year over year in the first nine months of 2021. 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. See here for a complete list of exchanges and delays. The current events are unprecedented, LME said in a notice. Matthew Chamberlain speaks on "Bloomberg Markets: Europe.". For the LME, the future isunclear. 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. Tsingshan's difficulties paying its margin calls have put its . 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. Then on March 7, nickel's price began its parabolic. Tsingshan and the LME declined to comment. Chinese entrepreneur Xiang Guangda has been caught out by nickel's price surge. Brokers, in turn, must hold margin at the clearing house, LME Clear. Anyone using the LME needs to understand that. The Companys registered office is at Bahamas Financial Centre, 3rd Floor, Shirley and Charlotte Street, P.O. Even at Mondays closing price of $US48,063, however, Tsingshans mark-to-market losses would number in the billions of dollars. The LME did not put it into default, instead giving it more time to pay. Prices exploded, thanks mainly to one companyindeed, one man. Undeterred, the Chinese tycoon has told banks he wants tomaintain his position, and has asked them to keep funding him despite the losses. On March 8,2022 price of Nickel went suddenly up $100 per kilogram . Nickel short interest was created by Tsingshan. Tsingshan's 2022 nickel equivalent output is . Following Russias invasion of Ukraine on 24 February, the three-month nickel contract rocketed to more than $100,000/tonne on 8 March, hitting an intra-day high at $101,365 on the same day. Tsingshan has secured credit promises from banks including JPMorgan Chase & Co. and China Construction Bank that could allow it to avoid defaulting on its margin calls, Bloomberg reported. Access unmatched financial data, news and content in a highly-customised workflow experience on desktop, web and mobile. 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. Xiang Guangda, who controls the worlds largest nickel producer, Tsingshan Holding, and is known as Big Shot in Chinese commodity circles, has closed out part of his companys short position and is considering whether to exit the wager altogether, the people said. Indeed, Russia is the worlds third-biggest nickel producer after Indonesia and the Philippines. Matthew Chamberlain, the LMEs chief executive officer, had stayed up to watch. 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. 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 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. 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. He started increasing his short position on the London Metal Exchange. Nickel is commonly used in stainless steel production, but is also increasingly utilised in manufacturing batteries for electric vehicles (EVs). .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! 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 . Its unclear whether he will get his way. 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. Trimegah menilai bisa. WATCH: Trading on LME is now set to resume Wednesday. 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 . See here for a complete list of exchanges and delays. 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As the market was picking up on the short squeeze of Tsingshan, the LME had decided to intervene. 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. Mampukan Tsingshan bertahan? 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. Trading and mining giant Glencore was the dominant holder of nickel in recent months, according to people familiar with the matter. Forbes places Xiang's real-time net worth at $1.2 billion. Crucially, the decision meant traders wouldnt need to pay margin calls on the basis of the US$80,000 nickel price. Tsingshan agreed standstill with JPMorgan-led group of banks, Talks continue on loan facility to backstop short position. 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. And once again, this short squeeze racked up billions in losses for those involved. By April, nickel prices began to fall below $35,000/tonne and Tsingshan began to close its short positions and settled its margin calls. (Bloomberg) -- One of the key Chinese players in last year's nickel short squeeze is preparing to meet London Metal Exchange Chief Executive Matthew Chamberlain in the first face-to-face encounter since the crisis that upended the global metals world.Most Read from BloombergHow Biden's Shock-and-Awe Tactic Is Failing to Stop RussiaChina Cease-Fire Proposal for Ukraine Falls Flat With US . Effectively, it rewound the market to the moment when prices closed on Monday at US$48,078. Are you considering whether or not to trade nickel or want to learn more about the market? The material provided on this website is for information purposes only and should not be understood as an investment advice. 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. articles a month for anyone to read, even non-subscribers! LME brokers and their clients were hit with margin call after margin call. Others in the market may also push up prices in anticipation of that short covering. Continue reading your article witha WSJ subscription, Already a member? The war in Ukraine surprised the market and led to a price surge, pushing Tsingshan's margin to billions as it rose in-line with nickel prices. 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. Why is nickel going up so drastically in a short period of time? 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 . Another key factor in the recent price volatility was the massive nickel short squeeze built up by Chinas Tsingshan Holding Group, the worlds largest stainless steel producer. CCBI Global Markets is another creditor, two separate sources said. The LME has been asleep at the wheel, according to Andrew Mitchell, director of nickel research at consulting firm Wood Mackenzie, who spoke to the Wall Street Journal. read more. To limit price volatility the LME imposed daily upper and lower price limits of 15% for all its physically delivered metals. 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 . It had sold nickel forward on the markets, betting on the price going down, not up. 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. a practice known in financial markets as margin calls. losed Joint Stock Company FinTech Solutions. They had offset their deals with Tsingshan by placing their own short positions on the LME. 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. Box N-4865, Nassau, Bahamas. Save my name, email, and website in this browser for the next time I comment. Is the Strength of Big Tech Regulation Sufficient at Present? 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 fear was that Tsingshan could not make its margin calls, interim payments to parties on the other side of the trade. Prices for the metal, used in stainless steel and electric vehicle batteries, were last in that range in December. Xiangs short position has now racked upbillions of dollars in losses. As of the evening of March 13, the LME had yet to announce a date for nickel trading to resume. That put Tsingshans banks and brokers, which include JPMorgan Chase, BNP Paribas, and Standard Chartered,in a bind. By early this year, it had taken ownership of more than half of the available nickel in LME warehouses. Its been under growing pressure to meet the payments in recent days, the people said. NIC's operations and cash flow remained stable in 2022 despite Tsingshan's significant loss on its nickel short position in March 2022. 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 should be mentioned that nickel had already rallied to $25,000 in January before easing off by the end of the month. Advertise | Careers | Editorial Guidelines | Executives from Goldman Sachs Group Inc. voiced their displeasure at the decision on a call with Chamberlain. (Podcast). 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