Save my name, email, and website in this browser for the next time I comment. Its not just a casino., Avenue Living CEO foresees consistency in 2021 real estate trends, Millennials must use COVID as an opportunity to prepare for their future: Financial planner, Canadian cities will bounce back and people will want to return to work: Edmonton Mayor Don Iveson, How employers are embracing flexible work arrangements, Retirees need to focus on risk management: Som Seif on the future of personal finances, Pandemic puts hair salons in startup mode: Ray Civello, Canadian Western Bank looking to flexible workplace policies post-pandemic: CEO, Many moving parts to how leaders can help entrepreneurs in the pandemic: Arlene Dickinson, How investors should view the real estate market, How real estate adapts as COVID puts urban living to the test, Chinese tycoon behind big nickel short faces billions in losses, LME CEO: Suspending Nickel Trading Was Right Decision. 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. Chinese nickel giant Tsingshan's hedge backfired Commodities companies of course generally benefit from higher prices for their products. . (Bloomberg) A unit of China Construction Bank Corp was given extra time by the London Metal Exchange to pay hundreds of millions of dollars in margin calls it missed on Monday amid an unprecedented rise in nickel prices, in this case According to people familiar with . Tsingshan yang dimiliki oleh swasta secara harfiah memiliki arti "gunung hijau", berbasis di kota Wenzhou di China dan memiliki . Neither party seems very keen on this idea, however. This is lower than Nickel Mines' expected profit margin for nickel in matte at current prices. Reuters provides business, financial, national and international news to professionals via desktop terminals, the world's media organizations, industry events and directly to consumers. 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. 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. 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. Then on March 7, nickel's price began its parabolic. Nickel short interest was created by Tsingshan. Tsingshan thus desperately scrambled to buy nickel to cover its short position, which only added further upward pressure on prices. He ranked 235th on the 2021 Hurun's China rich list, which puts his net worth closer to $4.2 . Tsingshans were even larger, numbering roughly US$3 billion, according to a Bloomberg calculation based on the companys total short positionwhich, even after Xiang had closed out a portion of the bet in previous weeks, was over 150,000 tons. 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. Xiang Guangda, the actual controller of Tsingshan, believes that the entry of so much nickel into the market will bring nickel prices down. Some think this could herald the end of the exchange itself. 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. The fallout was immediate. Keep in mind that past performance is no guarantee of future returns. Reuters could not determine how large Tsingshan's short position currently is after it cut its exposure. The price continued to climb higher as one of the world's largest nickel producers, Russia decided to invade Ukraine. 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. Tsingshan Holdings was founded in 1988 by Xiang Guangda in Wenzhou. It is up nearly 400% so far this year. For non-personal use or to order multiple copies, please contact That put Tsingshans banks and brokers, which include JPMorgan Chase, BNP Paribas, and Standard Chartered,in a bind. 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. It did not provide any other details, such as how long the standstill period would last. Credit: INF News.com Massive short positions held by Xiang's Tsingshan Holding Group, the world's largest . losed Joint Stock Company FinTech Solutions. During the standstill agreement, the company and banks will discuss a standby secured liquidity facility, Tsingshan said. 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 . Four or five of the brokerages that are LME members would have failed, a shock that could have devastated the global metals industry. Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com. Tsingshan has been struggling to pay margin calls to its brokers, according to people familiar with the situation. Anyone using the LME needs to understand that. At the current price of nickel, the brokers themselves wouldnt be able to pay their margin calls, they told the LME. The tycoon whose big short bet on nickel helped trigger one of the most dramatic price spikes in history has told his banks and brokers that he doesnt intend to reduce his position, according to people familiar with the matter. Now, the traders watched with a mixture of horror and grim fascination as the price went vertical. And once again, this short squeeze racked up billions in losses for those involved. In late February and early March, Tsingshan, which had sales of 352 billion yuan (US$56 billion) last year, paid its margin calls on time. 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 . Capital Com is an execution-only service provider. Build the strongest argument relying on authoritative content, attorney-editor expertise, and industry defining technology. 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. The super spike was driven by holders of short positions, including Tsingshan and its brokers, rushing to close them out. Tsingshan was betting that nickel prices would slump but instead they staged an unprecedented rally amid severe economic sanctions against Russia, a major global producer of the metal, over its invasion of Ukraine. 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. 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. Nevertheless, the short squeeze did trigger a whopping $8 billion margin call on Guangda. Its participants are a mix of the industrial metals companies, which tap the market to offset their price risks, and hedge funds, which use it to speculate. . A short squeeze is a market condition caused by massive short positions. Now they had to pay big margin calls on the exchange while receiving no margin from their client. The LME nickel short squeeze. Distribution and use of this material are governed by A consortium of hedge bank creditors that has a standstill agreement with Tsingshan agreed not to close out the positions against the company or to make further margin calls on the existing positions. The difference is that nickel is a commodity that touches the entire global economy. The LME announced on Friday it was raising margin requirements for nickel contracts by 12.5% to $2,250 a tonne. Box N-4865, Nassau, Bahamas. Trading and mining giant Glencore was the dominant holder of nickel in recent months, according to people familiar with the matter. To limit price volatility the LME imposed daily upper and lower price limits of 15% for all its physically delivered metals. Known as Big Shot in China for his imposing presence in the metal industry, Xiang Guangda, the founder of the worlds 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 one-eighth of all of the LMEs outstanding contracts at its peak. 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. Among them were some of the biggest names on Wall Street. If you are considering investing or trading nickel, its important to do your own research. Some have also warned that much of the chaos in the nickel market may not be over yet. The most comprehensive solution to manage all your complex and ever-expanding tax and compliance needs. Given our role in supervising the LME, we have been, and will continue to be, taking a very close interest in how it is managing and responding to the issues, the FCA confirmed in late March. Advertise | Careers | Editorial Guidelines | Traders must deposit cash, known as margin, with their brokers on a regular basis to cover potential losses on their positions. But its extremely unusual for an exchange to cancel whole sessions of trading after the fact. And thank you everyone for your attendance on today's call for the Nickel Industries Full Year 2022 Results. For participants in commodities exchanges, a price rally is not necessarily good news. See here for a complete list of exchanges and delays. The LME nickel short squeeze was created by Chinese stainless-steel producer Tsingshan as it built up massive short positions for the metal, and its margin calls spike in-line with the surge in nickel prices in March. ), by sales channel (Direct Channel, Distribution Channel), by player (Shandong Xinhai Technology, Tsingshan Holding Group, Eramet, Linyi Yichen Alloy, Jiangsu Delong Nickel Industry . The three-month LME nickel prices hit an intra-day high at $101,365 a metric tonne on 8 March 2022. FY18 RESULTS, FY19 GUIDANCE AND CORPORATE PRESENTATION 22 AUGUST 2018 AGENDA Results Guidance Corporate Operations Growth Exploration Nickel Market DISCLAIMER AND FORWARD Tsingshan's 2022 nickel equivalent output is estimated at 850,000 tonnes. Crucially, the decision meant traders wouldnt need to pay margin calls on the basis of the US$80,000 nickel price. Creditors and banks who acted for Tsingshan were demanding margin settlements and the closing of all positions. our Subscriber Agreement and by copyright law. All quotes delayed a minimum of 15 minutes. As the price rose through the London day after offices in Asia had closed, Tsingshan started struggling to pay, the people say. Exchanges. Its also one of the most important raw materials needed inmaking batteriesfor electric vehicles. CCBI Global Markets is another creditor, two separate sources said. The arrangement will also help the pave the way for the London Metal Exchange to restart nickel trading, they 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. Prices exploded, thanks mainly to one companyindeed, one man. read more. Tsingshan debacle exposes weak underbelly of LME. Some hedge funds were buying nickel contracts in a bet on the electric vehicle boom. 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. Tsingshan's difficulties in paying its margin calls, and the company's ongoing bailout negotiations, have put its banks and brokers in a bind, as they have had to make hefty margin calls of their own at the LME to cover their short positions on the exchange. Browse an unrivalled portfolio of real-time and historical market data and insights from worldwide sources and experts. The Initial Margin was $20,000 per contract. 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. Tsingshan was unable meet margin calls and only avoided bankruptcy after . You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. He was awakened by a phone call at 5:30 a.m. The major market events for the week ahead right in your inbox. 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. 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. ), by application (Stainless Steel Industry, Electronics Industry, etc. For the fourth quarter, the company expects to generate "high single-digit. Miners, traders, and manufacturers often use the market to make short betsthat is, to make money when prices fall. 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. 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 . That means it would have suffered much more than $US2 billion ($2.7 billion) of daily losses at the most extreme point of nickels surge. Yet the day before, the market had started to unravel, with prices rising by astunning66 per cent to US$48,078. However, for business days 7th and 8th March, they would remain at . 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. Three-month nickel on the LME more than doubled to over $100,000 a ton yesterday before the LME stepped in to halt trading of the metal. (Podcast). Browse an unrivalled portfolio of real-time and historical market data and insights from worldwide sources and experts. read more. 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. 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. our Subscriber Agreement and by copyright law. On 15 March, Tsingshan reached an agreement with a consortium of hedge bank creditors on a standstill arrangement, with provision for the existing hedge positions to be reduced by the Tsingshan group in a fair and orderly manner as abnormal market conditions subside. Only you can decide whether nickel is a good buy or not. 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. 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 on the London Metal Exchange (LME), the company said on Monday, a move sources said should help calm the market. 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. 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