(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 . The price continued to climb higher as one of the world's largest nickel producers, Russia decided to invade Ukraine. .css-16c7pto-SnippetSignInLink{-webkit-text-decoration:underline;text-decoration:underline;cursor:pointer;}Sign In, Copyright 2023 Dow Jones & Company, Inc. 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. Chinese nickel giant at center of action, Tsingshan, received financial lifeline from banks to help meet margin calls related to $8 billion in paper losses Since Russia invaded Ukraine at the. That put Tsingshans banks and brokers, which include JPMorgan Chase, BNP Paribas, and Standard Chartered,in a bind. Join the 500.000+ traders worldwide that chose to trade with Capital.com, Also you can contact us: 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. 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 record rally fuelled by the conflict . 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. 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. 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. 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%. Xiang Guangda in 2017. But its obligations dwarfed its available cash and bank credit. Everything changed when Russia invaded Ukraine. 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. 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. We do not make any representations or warranty on the accuracy or completeness of the information that is provided on this page. LME brokers and their clients were hit with margin call after margin call. 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. 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. Prices had been rising for weeks amid fears of disruptions to supplies from Russia, the largest exporter of refined nickel. The industry leader for online information for tax, accounting and finance professionals. 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. Chinese entrepreneur Xiang Guangda has been caught out by nickel's price surge. [2] It moved into the Indonesian nickel industry in 2009. read more. Four or five of the brokerages that are LME members would have failed, a shock that could have devastated the global metals industry. But to hedge against a a drop in prices, they use. Its not clear to what extent Xiang saw his position as merely a hedge or as a speculative bet. 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. Comparable-store sales rose 19.3% in fiscal 2020 and grew another 14.4% year over year in the first nine months of 2021. By now, Tsingshan wasnt the only nickel company that was strugglingjust the biggest. 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. Access unmatched financial data, news and content in a highly-customised workflow experience on desktop, web and mobile. Capital Com Online Investments Ltd is a limited liability company with company number 209236B. Just after 6 a.m., the price of nickel passed US$100,000 a ton. (Podcast). During the standstill agreement, the company and banks will discuss a standby secured liquidity facility, Tsingshan said. 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. Tsingshan agreed standstill with JPMorgan-led group of banks, Talks continue on loan facility to backstop short position. 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. 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. CCBI Global Markets is another creditor, two separate sources said. Exchanges. 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. Now, the traders watched with a mixture of horror and grim fascination as the price went vertical. Beijing is supportive of him, Xiang told contacts recently. Why is nickel going up so drastically in a short period of time? (HNI) to produce higher-grade nickel matte. 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. People familiar with the discussions said the exchange would ideally prefer to wait until Xiang has reached a resolution with his banks and brokers. 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 LME at the end of the day is a physical metal market, he says. It marked the first major market failure sinceRussias invasion of Ukrainejolted global markets, showing how the removal of one of the worlds largest exporters of resources from the financial system in the space of weeks is having ripple effects across the world. The majority of retail investor accounts lose money when trading CFDs. Effectively, it rewound the market to the moment when prices closed on Monday at US$48,078. It also doesn't create waste and may help fight the climate crisis. Nevertheless, the short squeeze did trigger a whopping $8 billion margin call on Guangda. Assessing the Incremental Costs of Regulation and Supervision Faced by Next-Gen Operating Models for Bankers and Advisors, Macroprudential Policy and Real Estate Funds. 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 record rally fuelled by the conflict in Ukraine, three sources familiar with the matter said. But the effects of the short squeeze are likely to be felt in other ways. Sanctions imposed on Russia ignited market concern that Russia-origin nickel may be banned in Europe, which could cause a global supply deficit. If you are considering investing or trading nickel, its important to do your own research. 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. Tsingshan was unable meet margin calls and only avoided bankruptcy after . The LME did not put it into default, instead giving it more time to pay. A sharp surge in nickel prices triggered margin call fears at the London Metal Exchange which suspended trading after prices doubled in hours. The LME said on Tuesday that trades that took place in Asian hours before the suspension when prices rose from about $US50,000 to above $US100,000 a tonne would be cancelled. . 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. For Xiangs big short position, that was painful. Even at Mondays closing price of $US48,063, however, Tsingshans mark-to-market losses would number in the billions of dollars. Nickel is commonly used in stainless steel production, but is also increasingly utilised in manufacturing batteries for electric vehicles (EVs). 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. Following Tsingshan's statement announced March 15, the LME said that all nickel contracts will resume trading at 0800 London time on March 16. Challenges Remain, But There Are Opportunities to Be Interview with Mr. Olukayode Pitan, Chief Executive Officer Unemployment in South Africa: Urgent Attention Required, The US-Africa Leaders Summit: Fostering a Closer Relationship with the Continent, Agenda BC#: Innovation and Inclusion in the Brazilian Financial System, Why Fertiliser Prices Have Been So Volatile This Year. Several large brokers got margin calls of close to US$1 billion each over the course of the day. read more. 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. 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. A week earlier, nickel was trading around $25,000 and the price of the metal has more than quadrupled in a matter of days. Tsingshan Holding Group held the biggest short position for nickel on the LME. Browse an unrivalled portfolio of real-time and historical market data and insights from worldwide sources and experts. It said the banks agreed not to make margin calls or close out their positions against Tsingshan while the company is resolving its nickel margin and settlement requirements. 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 . Help using this website - Accessibility statement. 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. Many traders expect the price to return to more normal levels once the margin call chaos has been resolved. 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. See here for a complete list of exchanges and delays. Going up so drastically in a short period of time unrivalled portfolio of real-time and historical market data insights! To pay London metal exchange which suspended trading after prices doubled in hours nine months of 2021 the day a! 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