Inability to deliver the products was a big problem for Tsingshan, the analyst added, noting that the company has nickel iron, stainless steel, and nickel matte but noelectrolytic nickel, which is the type traded on the LME. Copper. The prices that were being seen during that Asian session were becoming disconnected from, I believe, physical reality.. Xiang Guangda, the billionaire owner of Tsingshan Holding Group. Qingshan Holding Group,Nickel,Futures Contract, Paris Looms as Europe's Largest Financial Market, French Economy Minister Says, Alibaba, Spain's El Corte Ingles Department Store Ally on Digital Retail, China's GEM to Supply 100,000 Tons of Lithium Battery Materials to Korea's Ecopro, Toshiba Home Appliances Returns to Profit After Midea Takeover, Chairman Says, How AR is Poised to Change Business Forever. The Chinese government may also play a role. Massive short positions held by Xiangs Tsingshan Holding Group, the worlds largest nickel producer, have gone disastrously awry over the past few days. Save my name, email, and website in this browser for the next time I comment. document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Company says it puts it into the league of the largest undeveloped nickel deposits in the world. The fallout was immediate. Its unclear whether he will get his way. . Now the Chinese tycoon known as Big Shot must decide whether to unwind a wager that risks fueling more dramatic swings in one of the worlds most prized metals. Charged with maximising the value of Glencore's physical nickel assets across the global portfolio through supporting collaboration efforts to manage risk and improve operability and performance. Nickel prices surged to an all-time high on Tuesday, up roughly 250% in just two days, and forcing the London Metal Exchange to close trading. Last modified on Wed 15 Feb 2023 06.23 EST. Including positions on the London Metal Exchange and bilateral bets with banks, Xiang still has short holdings in the region of 150,000 tonnes, the people said. Miners, traders, and manufacturers often use the market to make short betsthat is, to make money when prices fall. Yet the day before, the market had started to unravel, with prices rising by astunning66% to $48,078. Nickel prices usually move a few hundred dollars per ton in a day. For participants in commodities exchanges, a price rally is not necessarily good news. The annals of commodity markets are full of tales of producers and traders, fromMetallgesellschafttoSumitomo, that blurred the lines between hedging and speculation and ended with billions of dollars in losses. The two major mining companies in Sudbury are working together to . Hansen of Concord Resources argues that financial investors who traded nickel last week should have been prepared for the LME to step in. That put Tsingshans banks and brokers, which includeJPMorgan Chase,BNP Paribas, andStandard Chartered,in a bind. Now, people familiar with the matter say, the exchange is likely to introduce such measures as position limits and greater transparency. They held a hurried call on Monday evening, but decided to allow the nickel market to continue trading. For a while, it wasunclear which view of the market would prevail. Activity . The spike was driven in large part by a short squeeze centred on Chinese tycoon Xiang Guangda, who had amassed a big wager that nickel prices would fall through his company Tsingshan Holding Group. https://bbgvod-azure-us-east1-zenko.global.ssl.fastly.net/vod/vod/m/ODg0NDM2Mg/Q2xvdWRfNTgyODY2/3fb888db-fa8e-42e4-b488-726dae69584b_150.mp4, Nickel price spike purely financial but Tsingshan effect could linger, EV Nickels stock soars after announcing enormous maiden mineral resource in Ontario, Iron ore price jumps on China data, bullish steel demand outlook, Copper price rises as Chinas economy shows strong recovery, Gold price hits 1-week high on robust China economic data, Musk tamps down speculation that Tesla will mine lithium, Monumental shift in way junior mining stocks are valued is coming, Advance Lithium in joint venture talks with Mexicos national lithium company, Goldman warns carmakers against buying miners: It always end in tears. The LME halted trading of the metal yesterday and announced that it is unable to deliver on spot nickel contracts scheduled for March 9. However, Xiang believed the risks to be manageable, the people said, even as anunidentified nickel stockpilercontrolled at least half of the inventories on the exchange. . Our fundamental responsibility is market stability, he told Bloomberg TV. It also highlights the risks of an opaque market where a handful of players play outsized roles, deciding how and where purchasers like global battery makers secure raw materials. From a contractual perspective, you may be . 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. All Rights Reserved. Its not clear to what extent Xiang saw his position as merely a hedge or as a speculative bet. Summary. (This account of events in the nickel market is based on dozens of interviews with people involved, many of whom requested anonymity because the matters are private.). 115 000 MT. The LMEs special committee held another call at about 6am. LME brokers and their clients were hit with margin call after margin call. Nickel is also used in certain types of steel which lower magnetic properties. 2017 - 2018 Yicai Global, Yicai Media Group. For most of the past decade, theyd traded between $US10,000 ($13,700) and $US20,000. Earlier this week, nickel prices in London spiked by as much as 250 per cent in little more than 24 hours. However, Xiang believed the risks to be manageable, the people said, even as an unidentified nickel stockpiler controlled at least half of the inventories on the exchange. Tsingshan mostlymakesstainless steelthat isused inthepetroleum, chemicals, auto,and other fields. Cliff Asness, founder ofAQR 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. While Russias nickel exports havent been targeted by sanctions, U.S. and European buyers have nonetheless sought alternatives to Russian sources. Now, the traders watched with a mixture of horror and grim fascination as the price went vertical. Excellent coverage of an earth-shaking event. Short Interest; Premarket Screener . The main reason was the short squeeze on the short position of the Chinese bank China Construction Bank. The seeds of the epic short squeeze were sown last year, when nickel, like all commodities, was rallying from its Covid-era low. Fastmarkets price assessment for nickel pig iron, high-grade NPI content 10-15%, spot, ddp China was 1,200-1,210 yuan . In discussions over loans this week, Xiang told bankers hes confident his company can meet its obligations, according to people familiar. Its not clear to what extent Xiang saw his position as merely a hedge or as a speculative bet. A Glencore spokesman declined to comment. Traders and brokers on the open outcry pit at the London Metal Exchange. Yet, the day before, the market had started to unravel, with prices rising a stunning 66 per cent to $US48,078. The giant commodity traderGlencore Plcalso had a position on the LME that would benefit from rising prices. Xiang wanted to increase Tsingshans production dramatically by producing so-callednickel mattefor electric vehicle batteries. A market that many veterans simply describe as "broken." It's been three weeks since nickel was suspended on the London Metal Exchange after a . But its obligations dwarfed its available cash and bank credit. How Xiang got to this point is a story that encompasses Chinas emergence as a global economic behemoth. Miners, traders, and manufacturers often use the market to make short bets that is, to make money when prices fall. But the obvious consequence of so much nickel hitting the market, he believed, would be a fall in its price. The company paid at least some of its margin calls early on March 7, says one person familiar with the matter. 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. The production of Glencore Nikkelverk in 2019. For participants in commodities exchanges, a price rally is not necessarily good news. One resolution to the situation may be for Glencore and Xiang to strike a deal to use Glencores long positions to cancel out some of Xiangs short. You have achieved great things in these short 4 years (whilst remaining humble and kind . (via NewsDirect) Helix Resources Ltd (ASX:HLX) MD Mike Rosenstreich tells Proactive the company is ready to spin out its nickel and cobalt interests in the prolific Cobar Basin of NSW into a special-purpose vehicle aimed at maximising value for shareholders. Glencore has a short interest ratio ("days to cover") of 0.2, which is generally considered an acceptable ratio of short interest to trading volume. 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 companyTsingshan Holding Group Co.On Monday, a week after trading had been suspended, Xiang wasclose to securing a loan facilityfrom JPMorgan Chase & Co. and other banks that would allow him to maintain his short position and could lead to the market reopening. Some hedge funds were buying nickel contracts in a bet on the electric vehicle boom. Overseas market players have made some moves, Xiang said, driving up nickel prices in the last two days. Glencore plc is a Swiss multinational commodity trading and mining company with headquarters in Baar, Switzerland. The price was frozen, below the record high but still at $80,000 a ton. Poseidon Nickel stock opened the day at A$0.04 after a previous close of A$0.04. At the current price of nickel, the brokers themselves wouldnt be able to pay their margin calls, they told the LME. The LME made a near-unprecedented decision. Chinese entrepreneur Xiang Guangda has been caught out by nickels price surge. Now they had to pay big margin calls on the exchange while receiving no margin from their client. By now, the entire nickel industry was in crisis. The price was frozen, below the record high but still at $US80,000 a tonne. Enter the code below to reset your password. Strong passwords include numbers,letters,and special characters. 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. 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 (LME) to suspend trading for the first time in three decades. But today things have reversed, that is, Tsingshan Group has prepared 200,000 . Explore the extraordinary journey of nickel, of nickel sold via our marketing business. . Those past scandals forced reforms on the exchange. There are also traders making plans to abandon the LME nickel contract, a move that would reduce market liquidity, making it harder for everyone from miners to car companies to manage their exposure to prices and access financing. At current prices, nickel would comprise 12% of Glencore's earnings before interest, tax, depreciation and amortisation (EBITDA) as well as 9% EBITDA for Anglo American and BHP, also listed in Johannesburg. Chinese nickel heavyweight Tsingshan Holding Group was looking at an $8 billion trading loss after nickel prices suddenly exploded higher following Russia 's invasion of Ukraine, The Wall Street . Glencore will give almost 6bn to shareholders after the mining and commodities company reported record pre-tax profits of more than 28bn in 2022 . 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. 02 March 2023. Share. Even at that level, clients of LME brokers had failed to pay some $500 million of margin calls in relation to their short positions on the exchange, according to a person familiar with the matter. The LME at the end of the day is a physical metal market, he says. Sulphuric acid. Some aggrieved traders are already preparing to take legal action against the exchange. #GlencoreCopper #MetalOfTheFuture https://lnkd.in/eEqPmJn9. As Contract Writer / Coordinator, you will be part of the Contract Team, which is a team within the Coal Department. 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. Major international companies like BHP Group Ltd. and Rio Tinto Plc hedge against currencies, commodity prices and interest rates on an as required basis. One resolution to the situation may be for Glencore and Xiang to strike a deal to use Glencores long positions to cancel out some of Xiangs short. We produce some of the world's purest nickel. Most market participants expect nickel prices to come back down once the crisis around Xiangs position has been resolved. During the fiscal year 2021, the Swiss-based company Glencore reported a nickel production of some 102.3 thousand metric tons. The LME suspended nickel-market trading on Tuesday and the Shanghai Futures Exchangefollowed suita day later, after prices on Chinas top commodities bourse hit their daily upward limit. MT. LME chief executive Matthew Chamberlain had stayed up to watch. Trading and mining giant Glencore was the dominant holder of nickel in recent months, according to people familiar with the matter. Coal Department. It was 5.42 am on March 8 in London when the nickel market broke. The LME made a near-unprecedented decision. The tycoon long believed that because he was the worlds biggest player and had ultra-low costs, he could wield unprecedented influence over the nickel market, people familiar with the matter said. Prices rising a stunning 66 per cent to $ US48,078 you will be part of the market, believed... 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