Several large brokers got margin calls of close to US$1 billion each over the course of the day. Your decision to trade should depend on your attitude to risk, expertise in the market, the spread of your portfolio and how comfortable you feel about losing money. Bloomberg: Balance of Power focuses on the politics and policiesbeing shaped by the agenda of President Biden's administration. For the LME, the future isunclear. They had offset their deals with Tsingshan by placing their own short positions on the LME. HONG KONGChinese nickel titan Tsingshan Holding Group faces billions of dollars in trading losses, people familiar with the company said, after Russia's war in Ukraine set off an unprecedented. Not surprisingly, investors have not been particularly satisfied with the LMEs actionsor lack thereofin allowing this situation to transpire. Tsingshan, who pioneered the Rotary Kiln Electric Furnace (RKEF) process to produce low-cost nickel pig iron (NPI), is now the dominant player in the Indonesian NPI industry and a global leader in NPI processing technology, including having implemented the Argon Oxygen Decarburisation process which incorporates the direct hot charging of NPI into the stainless steel production process for a . Nickel prices shot up as much as 250% in two days on the LME at the start of this week. For non-personal use or to order multiple copies, please contact UNFORGIVEABLE,tweetedMark Thompson, a former trader at Trafigura and Apollo. The majority of retail investor accounts lose money when trading CFDs. Pleased to report an extremely strong year for the Nickel Industries and the. 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. 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. Weve received a lot of phone calls today, he said. One of the world's biggest nickel and stainless steel producers, Tsingshan started building a short position -- a wager that prices will fall -- in the nickel market last year. Xiang wanted to increase Tsingshans production dramatically by producing so-callednickel matte. The price spike left Tsingshan exposed to $8 billion USD of trading losses whilst struggling to meet their margin calls. Copyright | You should do your own research, looking at the latest news, technical analysis, and analyst commentary before trading. . The LME at the end of the day is a physical metal market, he says. China scoffs at FBI claim that Wuhan lab leak likely caused COVID pandemic, China's abrupt reopening sparks student accommodation crisis in Australia, Reporting by Pratima Desai; additional reporting by Sinead Cruise and Eric Onstad in London; Editing by Megan Davies, Jan Harvey, Tim Ahmann and Cynthia Osterman, U.S. House panel approves bill giving Biden power to ban TikTok, Russia tries to close ring on Bakhmut as Ukrainians mount 'furious resistance', Wall St falls as yields rally on hawkish comments, data, Erdogan indicates Turkey elections to be in May, three months after quake, Massachusetts U.S. Attorney taps ex-DOJ watchdog to defend her in ethics probe, Another BoE rate rise isn't inevitable, Bailey says, China's Xi cements ties with Belarus leader against background of Ukraine war, Russia's Lavrov meets Indian counterpart ahead of G20 talks, Exclusive news, data and analytics for financial market professionals. Bloombergs Joe Deaux reports. To limit price volatility the LME imposed daily upper and lower price limits of 15% for all its physically delivered metals. The three-month LME nickel prices hit an intra-day high at $101,365 a metric tonne on 8 March 2022. Following Russias invasion of Ukraine on 24 February, the three-month nickel contract rocketed to more than $100,000/tonne on 8 March, hitting an intra-day high at $101,365 on the same day. Chinese entrepreneur Xiang Guangda has been caught out by nickel's price surge. Tsingshan has been struggling to pay margin calls to its brokers, according to people familiar with the situation. Others took to social media. 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. ), by sales channel (Direct Channel, Distribution Channel), by player (Shandong Xinhai Technology, Tsingshan Holding Group, Eramet, Linyi Yichen Alloy, Jiangsu Delong Nickel Industry . But since last year, Tsingshan has also started to produce a source of nickel for batteries. Late Tuesday, the exchange said it anticipates trading wont resume before Friday. While Russias nickel exports havent been targeted by sanctions, U.S. and European buyers have nonetheless sought alternatives to Russian sources. 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 was unable meet margin calls and only avoided bankruptcy after . Reuters, the news and media division of Thomson Reuters, is the worlds largest multimedia news provider, reaching billions of people worldwide every day. 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. The current events are unprecedented, LME said in a notice. 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. In the meantime, the nickel market is on ice, with traders unable to exit their positions, and many billions of dollars tied up in margin calls. Continue reading your article witha WSJ subscription, Already a member? 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. Reuters could not determine how large Tsingshan's short position currently is after it cut its exposure. Is the Strength of Big Tech Regulation Sufficient at Present? People familiar with the discussions said the exchange would ideally prefer to wait until Xiang has reached a resolution with his banks and brokers. Only you can decide whether nickel is a good buy or not. Bloomberg: Balance of Power focuses on the politics and policiesbeing shaped by the agenda of President Biden's administration. Some think this could herald the end of the exchange itself. Xiang Guangda has been in discussions with banks led by JPMorgan Chase & Co. about a loan facility to backstop his short position, which has roiled the nickel market after he struggled to pay massive margin calls to banks and brokers last week. An employee. The metal is found in all our homes as a key ingredient of stainless steel. It could be even larger than that when positions taken through intermediaries are taken into account, people separately said. 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. 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. Perdagangan nikel di LME dihentikan sementara sejak Selasa lalu. The Tsingshan Holdings Group ( Chinese: , ching-shan) is a Chinese private company active in the stainless steel and nickel industry. Why bet against nickel when you have a nickel business? This will allow the trader to buy the security back at a lower price, return it to the lender and hopefully pocket a handsome profit. 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. Read on for our analysis on the recent LME nickel short squeeze and the market outlook. Subsequent reports suggested that only one-fifth of Tsingshans total nickel exposure was visible to the exchange; the rest was held in private over-the-counter trades with banks including JPMorgan Chase, BNP Paribas, Standard Chartered and United Overseas Bank Ltd. As such, Guangda was aiming for his massive short position to dominate the market and send the LME nickel price down. Just over a year after the historic short squeeze involving video-game retailer GameStop sent shockwaves around the financial world, a similar episode broke out in early March, this time on the London Metal Exchanges (LME) nickel market. 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.. Tsingshan has been finding it difficult to pay margin calls to its creditors, the report said. As the price rose through the London day after offices in Asia had closed, Tsingshan started struggling to pay, the people say. We expect the EBITDA margin to be around . At $2,250 a tonne, the capital required on 300,000 tonnes of nickel would be $675 million, according to Reuters calculations. Access unmatched financial data, news and content in a highly-customised workflow experience on desktop, web and mobile. Chinese nickel giant Tsingshan's hedge backfired Commodities companies of course generally benefit from higher prices for their products. The LME did not put it into default, instead giving it more time to pay. Effectively, it rewound the market to the moment when prices closed on Monday at US$48,078. Xiang Guangda -- who controls the world's largest nickel producer, Tsingshan Holding Group Co., and is known as "Big Shot" in Chinese commodity circles -- has closed out part of his company's short position and is considering whether to exit the wager altogether, the people said. document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Copyright International Banker 2023 | All Rights Reserved Subscription | About us | China's Tsingshan Holding Group has reached agreements with two companies to swap its . Given nickel matte prices of roughly $15,421/t May 18, we calculate a profit margin of $5,571/t for Tsingshan's nickel in matte. The LME nickel short squeeze. The arrangement will also help the pave the way for the London Metal Exchange to restart nickel trading, they said. It got to a point where there were things going on which were not normal market forces. Daniel Ghali, director of commodities strategy at TD Securities, meanwhile, believes the worlds pricing mechanism for nickel is failing. Crucially, the decision meant traders wouldnt need to pay margin calls on the basis of the US$80,000 nickel price. Matthew Chamberlain speaks on "Bloomberg Markets: Europe.". And once again, this short squeeze racked up billions in losses for those involved. 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. 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. 4.3 Global Ferro Nickel Sales Volume, Revenue, Price and Gross Margin (2016-2022) 4.4 United States Ferro Nickel Sales Volume, Revenue, Price and Gross Margin (2016-2022) Traders must deposit cash,. 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. Tsingshan thus desperately scrambled to buy nickel to cover its short position, which only added further upward pressure on prices. Bloomberg: Balance of Power focuses on the politics and policies being shaped by the agenda of President Biden's administration. Nickel short interest was created by Tsingshan. If nickel prices stay lofty it could complicate the energy transition with electric vehicle batteries costing more to produce. LME brokers and their clients were hit with margin call after margin call. 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 . Xiang Guangda in 2017. Tsingshan has been struggling to pay margin calls to its brokers, according to people familiar with the situation. 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. Indeed, Russia is the worlds third-biggest nickel producer after Indonesia and the Philippines. A Glencore spokesman declined to comment. 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. Reuters provides business, financial, national and international news to professionals via desktop terminals, the world's media organizations, industry events and directly to consumers. Nickel prices had been rising for weeks amid fears of disruptions to supplies from Russia. Even at that level, clients of LME brokers had failed to pay some US$500 million of margin calls in relation to their short positions on the exchange, according to a person familiar with the matter. At 1 a.m. on Tuesday, the market opened. And that was just for the portion of the short position it held directly on the exchangeabout 30,000 tons. See here for a complete list of exchanges and delays. See here for a complete list of exchanges and delays. Margin call ini membuat harga nikel meledak dan menembus US$ 100 ribu per ton dari hanya US$ 25 ribu per ton. Given that JPMorgan was reported as the biggest trading counterparty against which Tsingshans nickel trades were made, the US bank led the subsequent agreement to arrange a rescue credit facility, secured from various lenders, including China Construction Bank (CCB), to help the Chinese nickel giant address its immediate liquidity squeeze. Founded back in 1877 and now owned by Hong Kong Exchanges & Clearing (HKEX), the LME performs a critical role in determining benchmark prices for the global metals industry and provides a liquid market venue for financial institutions to make money. Some hedge funds were buying nickel contracts in a bet on the electric vehicle boom. Matthew Chamberlain, the LMEs chief executive officer, had stayed up to watch. Tsingshan accounted for about half that amount. .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. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents. Then on March 7, nickel's price began its parabolic. 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. Creditors and banks who acted for Tsingshan were demanding margin settlements and the closing of all positions. (Podcast). 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. 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 to suspend trading for the first time in three decades. The LME made a near-unprecedented decision. 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 . Anyone using the LME needs to understand that. 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. 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. Tsingshan and others had to buy . 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. The most comprehensive solution to manage all your complex and ever-expanding tax and compliance needs. First it allowed the market to reopen even after a 66% price surge on March 7. This copy is for your personal, non-commercial use only. Those 18 minutes will haunt me, says the executive, who wasnt authorized to speak publicly. 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. 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. ", Britain's Financial Conduct Authority (FCA) and the Bank of England are talking to the London Metal Exchange about the resumption of a fair and orderly market in nickel, the FCA said on Monday in response to a request for comment. The banks declined comment or did not respond to a request for comment. Tsingshan has been finding it difficult to pay margin calls to its creditors, the report said. It had sold nickel forward on the markets, betting on the price going down, not up. It also doesn't create waste and may help fight the climate crisis. 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. As of the evening of March 13, the LME had yet to announce a date for nickel trading to resume. The LMEs special committee held another call at about 6 a.m. Now they recognized that they had tosuspend trading. The industry leader for online information for tax, accounting and finance professionals. But to hedge against a a drop in prices, they use. Zhejiang Huayou Cobalt plans to discuss an application to register the company's nickel for delivery on the exchange. Last chance for up to $40 off TurboTax, All Jeans + Pants 25% off! Comparable-store sales rose 19.3% in fiscal 2020 and grew another 14.4% year over year in the first nine months of 2021. Its nickel matte production in Indonesia is nearly 8,000 tonnes per month, according to the Shanghai Securities News. But its extremely unusual for an exchange to cancel whole sessions of trading after the fact. The fallout was immediate. Are you considering whether or not to trade nickel or want to learn more about the market? It was 5:42 a.m. on March 8 in London when the nickel market broke. Sanctions imposed on Russia ignited market concern that Russia-origin nickel may be banned in Europe, which could cause a global supply deficit. They held a hurried call on Monday evening, but decided to allow the nickel market to continue trading. Reuters, the news and media division of Thomson Reuters, is the worlds largest multimedia news provider, reaching billions of people worldwide every day. The LME suspended trading in nickel on Tuesday morning after one of the most dramatic price spikes in commodity market history. Help using this website - Accessibility statement. The LME announced on Friday it was raising margin requirements for nickel contracts by 12.5% to $2,250 a tonne. Our fundamental responsibility is market stability, he told Bloomberg TV. By capital Com or its agents meanwhile, believes the worlds pricing for. 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