See here for a complete list of exchanges and delays. Solugen Bio has built a chemical plant that produces all manner of chemical-based products using bio-based feedstock instead of fossil fuels. 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 above the $20,000/metric tonne (mt) mark on the upside before 2022. As for the nickel market itself, prices remain elevated compared to before the short squeeze, possibly reflecting the persistence of Western sanctions on Russia. 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. China's Tsingshan Holding Group has reached agreements with two companies to swap its . 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. Undeterred, the Chinese tycoon has told banks he wants tomaintain his position, and has asked them to keep funding him despite the losses. 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. Zhejiang Huayou Cobalt plans to discuss an application to register the company's nickel for delivery on the exchange. document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Copyright International Banker 2023 | All Rights Reserved Subscription | About us | It also doesn't create waste and may help fight the climate crisis. 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. 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 . He draws a comparison with Silver Thursday, the day in 1980 when an attempt bythe Hunt brothersto corner the silver market came unstuck. The LME suspended trading in nickel on Tuesday morning after one of the most dramatic price spikes in commodity market history. The creditors involved include both local and intentional banks, including J.P. Morgan and China Construction Bank . 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Nickel short interest was created by Tsingshan. People forgot that this isnt a video game retailer; its an important physical commodity.. Tsingshan thus desperately scrambled to buy nickel to cover its short position, which only added further upward pressure on prices. That might have taken down some of the LME 's member-brokers. Nickel short interest was created by Tsingshan. People familiar with the discussions said the exchange would ideally prefer to wait until Xiang has reached a resolution with his banks and brokers. HONG KONGChinese nickel titan Tsingshan Holding Group faces billions of dollars in trading losses, people familiar with the company said, after .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;}Russias war in Ukraine set off an unprecedented rise in the price of a key metal used in stainless steel and electric-vehicle batteries. Bloomberg: Balance of Power focuses on the politics and policiesbeing shaped by the agenda of President Biden's administration. The paper loss stood at $8 billion on Monday, before violent moves in nickel prices led the London Metal Exchange to suspend trading in the metal on Tuesday, one of the people said. 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. .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'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 . The seeds of the epic short squeeze were sown last year, when nickel, like all commodities, was rallying from its COVID-era low. The fallout was immediate. And once again, this short squeeze racked up billions in losses for those involved. Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com. Tsingshan has been finding it difficult to pay margin calls to its creditors, the report said. However, the short position holders have to pay a margin. Reuters, the news and media division of Thomson Reuters, is the worlds largest multimedia news provider, reaching billions of people worldwide every day. Traders must deposit cash,. Privacy Policy | Investor enthusiasm for nickel is high amid expectations of strong demand growth for the metal in electric vehicles. By now, Tsingshan wasnt the only nickel company that was strugglingjust the biggest. 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. But according to Bloomberg, the LME refrained from putting it into default, which allowed the broker to settle the margin calls the following day after several clients, including Tsingshan, received loans to cover their positions. Why bet against nickel when you have a nickel business? Browse an unrivalled portfolio of real-time and historical market data and insights from worldwide sources and experts. Build the strongest argument relying on authoritative content, attorney-editor expertise, and industry defining technology. Tsingshan agreed standstill with JPMorgan-led group of banks, Talks continue on loan facility to backstop short position. The simple fact here is that we did not have visibility over the size of the risk, Matthew Chamberlain, the LMEs chief executive, also stated. Our Standards: The Thomson Reuters Trust Principles. Capital Com Online Investments Ltd is a limited liability company with company number 209236B. We do not make any representations or warranty on the accuracy or completeness of the information that is provided on this page. 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.. As the price rose through the London day after offices in Asia had closed, Tsingshan started struggling to pay, the people say. To limit price volatility the LME imposed daily upper and lower price limits of 15% for all its physically delivered metals. Tsingshan's 2022 nickel equivalent output is estimated at 850,000 tonnes. The banks declined comment or did not respond to a request for comment. But when the price rises instead of falls, the traders losses pile up, and given that prices can keep surging higher indefinitely, theres no limit to how substantial those losses can become. You should do your own research, looking at the latest news, technical analysis, and analyst commentary before trading. 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. 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. 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. By now, the entire nickel industry was in crisis. The three-month LME nickel prices hit an intra-day high at $101,365 a metric tonne on 8 March 2022. At that time of day, bleary-eyed traders are typically just glancing at prices as they swig coffee on their way to the office. Copyright | 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. Keep in mind that past performance is no guarantee of future returns. The difference between trading assets and CFDs. The most notable holder of short positions is Tsingshan Holdings - one of the world's largest nickel and stainless steel producers - which is believed to own positions on about 100,000 tons of nickel with paper losses totaling up to $8 billion before the London Metal Exchange halted trading. Short-covering trades made last week by the Chinese billionaire contributed to a swift, huge surge. 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. A stressful week in markets got even worse for some metals traders when the main exchange's software misfired by generating erroneous margin calls, adding to the chaos at a time when brokers . 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 . Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com. Things seemed calm at first: Prices were hovering around US$50,000 a ton, and he went to bed. Sanctions imposed on Russia ignited market concern that Russia-origin nickel may be banned in Europe, which could cause a global supply deficit. Now, the traders watched with a mixture of horror and grim fascination as the price went vertical. "In the course of the standstill period, Tsingshan and the consortium banks will progress discussions in relation to a standby secured liquidity facility," the company said. 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 Worse, the chaos was spreading to other markets: Zinc prices spiked 15 per cent in a few minutes to a record high, only to collapse again. 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. Is the Strength of Big Tech Regulation Sufficient at Present? Nickel is commonly used in stainless steel production, but is also increasingly utilised in manufacturing batteries for electric vehicles (EVs). Xiang didnt believe the rally would last. 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. 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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. For a while, it wasunclear which view of the market would prevail. read more. Mr Xiang told Chinese news outlet Yicai that Tsingshan did not have any problems with its nickel trading. Tsingshan and others had to buy . 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. The giant commodity trader Glencore Plc also had a position on the LME that would benefit from rising prices. 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. The most comprehensive solution to manage all your complex and ever-expanding tax and compliance needs. 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. Our fundamental responsibility is market stability, he told Bloomberg TV. It had sold nickel forward on the markets, betting on the price going down, not up. Tsingshan accounted for about half that amount. At 1 a.m. on Tuesday, the market opened. We expect the EBITDA margin to be around . Among them were some of the biggest names on Wall Street. 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. A short squeeze is a market condition caused by massive short positions. 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. 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