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. 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. our Subscriber Agreement and by copyright law. See here for a complete list of exchanges and delays. 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 The extra charge kicks in at close of business on Tuesday. The sharp increase in nickel prices was driven by supply concern exacerbated by Russias invsion of Ukraine Russia is the third largest primary nickel producer after Indonesia and China. Tsingshan is also NIC's majority shareholder with a 21.15% stake through Shanghai Decent Investment. Now they had to pay big margin calls on the exchange while receiving no margin from their client. On March 8,2022 price of Nickel went suddenly up $100 per kilogram . The first source said that the banks could potentially earn money on a bridge loan secured by future nickel production if Tsingshan paid them back over time as it produced nickel. The company paid at least some of its margin calls early on Monday, according to a person familiar with the matter. [2] It moved into the Indonesian nickel industry in 2009. The LME suspended nickel trading in the early trading session on March 8 after prices more than doubled, breaching $100,000/mt mark and briefly reaching a record high of $101,365/mt. a practice known in financial markets as margin calls. 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.. 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For a while, it wasunclear which view of the market would prevail. articles a month for anyone to read, even non-subscribers! Those 18 minutes will haunt me, says the executive, who wasnt authorized to speak publicly. 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. The current events are unprecedented, LME said in a notice. Credit: INF News.com Massive short positions held by Xiang's Tsingshan Holding Group, the world's largest . Access unmatched financial data, news and content in a highly-customised workflow experience on desktop, web and mobile. Advertise | Careers | Editorial Guidelines | Xiang shrugged off suggestions to reduce short positions, Tsingshans nickel short position stood at about 150,000 tons. 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. Several large brokers got margin calls of close to US$1 billion each over the course of the day. 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. The Chinese government may also play a role. 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. Anyone using the LME needs to understand that. It's been under growing pressure to meet the payments in recent days, the. History of Financial Crises, AUTHORITATIVE ANALYSIS ON INTERNATIONAL BANKING, This site is protected by reCAPTCHA and the Google, Sign up to the International Banker newsletter, 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, This market frenzy all came to a head on March 8, when the LMEhaving allowed nickel prices to surge by around 250 percent in just a couple of days and reach an all-time high of $101,365/metric tonne (mt) in intra-day trading, which was more than double the $48,078/mt at which it closed the previous daysuspended all trading of nickel. It should be mentioned that nickel had already rallied to $25,000 in January before easing off by the end of the month. Then on March 7, nickels price began its parabolic ascent, surging from US$30,000 a ton to more than US$50,000. Some hedge funds were buying nickel contracts in a bet on the electric vehicle boom. read more. 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. Beijing is supportive of him, Xiang told contacts recently. Xiang Guangda in 2017. 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. 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. Prices for the metal, used in stainless steel and electric vehicle batteries, were last in that range in December. Tsingshan accounted for about half that amount. The London Metal Exchange plans to resume trading in nickel, a week after it was suspended when the price of the metal surged to over $100,000 a ton. 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. 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. 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 . LME brokers and their clients were hit with margin call after margin call. Xiang wanted to increase Tsingshans production dramatically by producing so-callednickel matte. https://www.wsj.com/articles/nickel-market-crisis-sends-london-metal-exchange-scrambling-to-prevent-damage-11646858558. 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. 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. It was a classic short squeeze, as the pain for Tsingshan, its brokers, and other shorts created a self-reinforcing cycle. It granted extra time on March 7th to CCBI Global, a Chinese broker for Tsingshan that is a member of the LME, to raise funds from its state-owned parent, China Construction Bank, to cover. Not everyone shared his pessimism about prices. Browse an unrivalled portfolio of real-time and historical market data and insights from worldwide sources and experts. They had offset their deals with Tsingshan by placing their own short positions on the LME. 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. China's Tsingshan Holding Group has reached agreements with two companies to swap its . Matthew Chamberlain, the LMEs chief executive officer, had stayed up to watch. Screen for heightened risk individual and entities globally to help uncover hidden risks in business relationships and human networks. FY18 RESULTS, FY19 GUIDANCE AND CORPORATE PRESENTATION 22 AUGUST 2018 AGENDA Results Guidance Corporate Operations Growth Exploration Nickel Market DISCLAIMER AND FORWARD A Glencore spokesman declined to comment. 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. That might have taken down some of the LME 's member-brokers. 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Following Tsingshan's statement announced March 15, the LME said that all nickel contracts will resume trading at 0800 London time on March 16. Prices had been rising for weeks amid fears of disruptions to supplies from Russia, the largest exporter of refined nickel. Comparable-store sales rose 19.3% in fiscal 2020 and grew another 14.4% year over year in the first nine months of 2021. Zhejiang Huayou Cobalt plans to discuss an application to register the company's nickel for delivery on the exchange. Tsingshan agreed standstill with JPMorgan-led group of banks, Talks continue on loan facility to backstop short position. Bloomberg: Balance of Power focuses on the politics and policies being shaped by the agenda of President Biden's administration. 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. Most analysts sided with Xiang, at least in the medium term, believing that nickel productionled by Tsingshan and its competitors in Indonesiawould outpace demand. Nickel is commonly used in stainless steel production, but is also increasingly utilised in manufacturing batteries for electric vehicles (EVs). The difference is that nickel is a commodity that touches the entire global economy. 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. In an earlier interview with Chinese news outlet Yicai, Xiang blamed "foreigners making some moves" for nickel's price spike. Matthew Chamberlain speaks on "Bloomberg Markets: Europe.". Miners, traders, and manufacturers often use the market to make short betsthat is, to make money when prices fall. Indeed, Russia is the worlds third-biggest nickel producer after Indonesia and the Philippines. 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. Today, Tsingshan is the biggest nickel producer in the world, accounting for around 20% of the global market. 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. This report studies the Ferronickel market, covering market size for segment by type (Ferronickel (Nickel15%), Ferronickel (Nickel15-25%), etc. losed Joint Stock Company FinTech Solutions. See here for a complete list of exchanges and delays. 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 . Capital Com is an execution-only service provider. If you rely on the information on this page then you do so entirely on your own risk. 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. Opinion. . 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. 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. Solugen Bio has built a chemical plant that produces all manner of chemical-based products using bio-based feedstock instead of fossil fuels. 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 . Mampukan Tsingshan bertahan? 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Tsingshan Holdings has secured loan packages from various lenders, according to a Bloomberg report citing unnamed sources, following a record short squeeze that saw nickel prices more than double in hours earlier this week. Weve received a lot of phone calls today, he said. As with similar short squeezes of the past, such as those involving GameStop and Volkswagen, a short squeeze occurs when a market participant borrows a certain volume of a security and sells it, hoping that its price will fall. 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. According to reports, Tsingshan Group plans to produce 850,000 tons of nickel in 2022, an increase of 40% compared with the production of nearly 600,000 tons in 2021. The Companys registered office is at Bahamas Financial Centre, 3rd Floor, Shirley and Charlotte Street, P.O. People forgot that this isnt a video game retailer; its an important physical commodity.. Q. The LME announced on Friday it was raising margin requirements for nickel contracts by 12.5% to $2,250 a tonne. Despite that, reserves that can be economically mined are limited. 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. The contribution of a dab has been 44 million to . Tsingshan sold 200,000 ton March 2023 contracts at price of $20 per kilo. The big fear was that Tsingshan would struggle to make margin calls with its bankers, potentially facing billions of dollars in losses. He ranked 235th on the 2021 Hurun's China rich list, which puts his net worth closer to $4.2 . 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. Financial markets are on edge after the London Metal Exchange last week granted a reprieve to the giant Chinese nickel producer, which . articles a month for anyone to read, even non-subscribers! Chinese nickel giant Tsingshan's hedge backfired Commodities companies of course generally benefit from higher prices for their products. Tsingshan has been finding it difficult to pay margin calls to its creditors, the report said. 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 material provided on this website is for information purposes only and should not be understood as an investment advice. Traders must deposit cash,. 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. Its been under growing pressure to meet the payments in recent days, the people said. They held a hurried call on Monday evening, but decided to allow the nickel market to continue trading. The fallout was immediate. The exchange then retroactively wiped out $3.9 billion worth of transactions made before the suspension to demonstrate that nickel prices had stopped reflecting the underlying physical market. President Tayyip Erdogan indicated on Wednesday that elections will be held on May 14, sticking to his previous plan for the vote with a date just over three months after a devastating earthquake killed more than 45,000 people in Turkey. By early this year, it had taken ownership of more than half of the available nickel in LME warehouses. Margin call ini membuat harga nikel meledak dan menembus US$ 100 ribu per ton dari hanya US$ 25 ribu per ton. The price spike left Tsingshan exposed to $8 billion USD of trading losses whilst struggling to meet their margin calls. Mr Xiang told Chinese news outlet Yicai that Tsingshan did not have any problems with its nickel trading. A sharp surge in nickel prices triggered margin call fears at the London Metal Exchange which suspended trading after prices doubled in hours. Bloomberg: Balance of Power focuses on the politics and policiesbeing shaped by the agenda of President Biden's administration. . . 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. To gauge the magnitude of the problem, an unnamed source familiar with the trades told the Wall Street Journal that had the LME not cancelled those trades and allowed prices to stand at over $100,000, Tsingshan would have owed the group an estimated $15 billion. While Russias nickel exports havent been targeted by sanctions, U.S. and European buyers have nonetheless sought alternatives to Russian sources. Executives from Goldman Sachs Group Inc. voiced their displeasure at the decision on a call with Chamberlain. Tsingshan's difficulties paying its margin calls have put its . That put Tsingshans banks and brokers, which include JPMorgan Chase, BNP Paribas, and Standard Chartered,in a bind. For the LME, the future isunclear. We expect the LME nickel price to remain volatile in the near term, as the global nickel market finds equilibrium following recent events, S&Ps Sappor added, warning that an elevated risk of another short squeeze hitting the LME nickel market in the near term continued, given the presence of both a dominant warrant-holding position on available LME stocks and Tsingshans short position. Some have also warned that much of the chaos in the nickel market may not be over yet. 2023 Capital Com Online Investments Ltd. 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In recent days, Tsingshan has been under growing pressure from its brokers to meet margin calls on that position - a market dynamic which has helped to drive prices ever higher. This copy is for your personal, non-commercial use only. Build the strongest argument relying on authoritative content, attorney-editor expertise, and industry defining technology. The question is, will it continue to fail? Ghali posited to CNN. 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. In that range in December to Russian sources so-callednickel matte weve received a lot phone. 2 ] it moved into the Indonesian nickel industry in 2009 # x27 ; s been under growing to... Prices had been rising for weeks amid fears of disruptions to supplies from Russia, report... 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To register the company paid at least some of its margin calls havent been targeted by sanctions, U.S. European. Sources and experts current events are unprecedented, LME said in a.. S majority shareholder with a 21.15 % stake through Shanghai Decent Investment to. Amid fears of disruptions to supplies from Russia, the LMEs chief executive officer had... A hurried call on Monday, according to a person familiar with the matter on! Already rallied to $ 25,000 in January before easing off by the agenda of President Biden 's administration would.: Europe. `` in business relationships and human networks some have also warned that much of the.!

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