Tsingshan has been struggling to pay margin calls to its brokers, according to people familiar with the situation. (Podcast). Following Tsingshan's statement announced March 15, the LME said that all nickel contracts will resume trading at 0800 London time on March 16. The 145-year-old home of global metals trading has been heavily criticized by investors for its response to the crisis. Bloomberg: Balance of Power focuses on the politics and policies being shaped by the agenda of President Biden's administration. The contribution of a dab has been 44 million to . To gauge the magnitude of the problem, an unnamed source familiar with the trades told the, 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 16, 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, But the LME has defended its actions, arguing that the decisions it took were made with full regard to regulatory due process and in the interests of the market as a whole, according to a spokesman for the exchange, who spoke to UK financial-news publication, Manuel A. Muoz European Central Bank (ECB), Miguel Moreno Tripp EGADE Business School | Crowe Global, Flix Villatoro Universidad Adolfo Ibez Business School, Kenneth D. Simonson Associated General Contractors of America (AGC), Dalia A. Kader Commercial International Bank (CIB), Davi Ferreira Veronese University of So Paulo, Maria Paula Bertran University of So Paulo, Thanos Andrikopoulos University of Hull, Tim Johnson JB Super Yachts | TJB Private Travel. But to hedge against a a drop in prices, they use. The XM Research Desk, manned by market expert professionals, provides live daily updates on all the major events of the global markets in the form of market reviews, forex news, technical analysis, investment topics, daily outlook and daily vidoes. Neither party seems very keen on this idea, however. Despite that, reserves that can be economically mined are limited. But the LME has defended its actions, arguing that the decisions it took were made with full regard to regulatory due process and in the interests of the market as a whole, according to a spokesman for the exchange, who spoke to UK financial-news publication City A.M. during the week after the suspension. 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. 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. UNFORGIVEABLE,tweetedMark Thompson, a former trader at Trafigura and Apollo. A short position is created when a trader sells a security he does not own, with the intention of repurchasing it later at a lower price. And that was just for the portion of the short position it held directly on the exchangeabout 30,000 tons. A record-breaking rally in nickel prices that led the London Metal Exchange to halt trading on Tuesday is putting increased pressure on the Chinese stainless steel producer Tsingshan and its billionaire co-founder. 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. All quotes delayed a minimum of 15 minutes. Financial markets are on edge after the London Metal Exchange last week granted a reprieve to the giant Chinese nickel producer, which . read more. 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. Li Huan/Red Star News/VCG via Getty Images. Short-covering trades made last week by the Chinese billionaire contributed to a swift, huge surge. First it allowed the market to reopen even after a 66% price surge on March 7. The most comprehensive solution to manage all your complex and ever-expanding tax and compliance needs. The LME at the end of the day is a physical metal market, he says. The extra charge kicks in at close of business on Tuesday. As the price rose through the London day after offices in Asia had closed, Tsingshan started struggling to pay, the people say. For most of the past decade, theyd traded between US$10,000 and US$20,000. Solugen Bio has built a chemical plant that produces all manner of chemical-based products using bio-based feedstock instead of fossil fuels. After trading was suspended Tuesday following an unprecedented surge in prices, the London Metal Exchange said it does not expect nickel trading to resume before March 11. At $2,250 a tonne, the capital required on 300,000 tonnes of nickel would be $675 million, according to Reuters calculations. Now, the traders watched with a mixture of horror and grim fascination as the price went vertical. read more. A week earlier, nickel was trading around $25,000 and the price of the metal has more than quadrupled in a matter of days. The seeds of the epic short squeeze were sown last year, when nickel, like all commodities, was rallying from its COVID-era low. 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. articles a month for anyone to read, even non-subscribers! This copy is for your personal, non-commercial use only. He ranked 235th on the 2021 Hurun's China rich list, which puts his net worth closer to $4.2 . 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. 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. 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. For Xiangs big short position, that was painful. On this day, however, metal traders across the city were glued to a screen, watching the price action on the electronic market, which was already open to accommodate Asian trading. Nickel prices shot up as much as 250% in two days on the LME at the start of this week. Now, people familiar with the matter say, the exchange is likely to introduce such measures as position limits and greater transparency. Xiang Guangda, the actual controller of Tsingshan, believes that the entry of so much nickel into the market will bring nickel prices down. Nickel short interest was created by Tsingshan. 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. He was awakened by a phone call at 5:30 a.m. 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. WATCH: Trading on LME is now set to resume Wednesday. But its extremely unusual for an exchange to cancel whole sessions of trading after the fact. 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. But since last year, Tsingshan has also started to produce a source of nickel for batteries. For non-personal use or to order multiple copies, please contact Indeed, reports suggest that a number of investors are now preparing lawsuits, while the LMEs regulator, the Financial Conduct Authority (FCA), is expected to investigate the incident. Several large brokers got margin calls of close to US$1 billion each over the course of the day. By early this year, it had taken ownership of more than half of the available nickel in LME warehouses. The frenzied move the largest-ever on the LME came as investors and industrial users who had sold the metal scrambled to buy the contracts back after prices initially rallied on concerns . 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%. Reuters, the news and media division of Thomson Reuters, is the worlds largest multimedia news provider, reaching billions of people worldwide every day. For non-personal use or to order multiple copies, please contact Everything changed when Russia invaded Ukraine. Tsingshan debacle exposes weak underbelly of LME. 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. NIC's operations and cash flow remained stable in 2022 despite Tsingshan's significant loss on its nickel short position in March 2022. During the standstill agreement, the company and banks will discuss a standby secured liquidity facility, Tsingshan said. 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. 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. 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. Browse an unrivalled portfolio of real-time and historical market data and insights from worldwide sources and experts. Erin Jonasson. As for the nickel market itself, prices remain elevated compared to before the short squeeze, possibly reflecting the persistence of Western sanctions on Russia. Some think this could herald the end of the exchange itself. Help using this website - Accessibility statement. 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. At 1 a.m. on Tuesday, the market opened. A sharp surge in nickel prices triggered margin call fears at the London Metal Exchange which suspended trading after prices doubled in hours. 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. Its unclear whether he will get his way. 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. .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. But nothing could prepare the market for what was about to follow, with the Russia-Ukraine conflict sending prices skywards on global supply concerns. read most from bloomberg Creditors and banks who acted for Tsingshan were demanding margin settlements and the closing of all positions. On March 8,2022 price of Nickel went suddenly up $100 per kilogram . Just after 6 a.m., the price of nickel passed US$100,000 a ton. By now, Tsingshan wasnt the only nickel company that was strugglingjust the biggest. The annals of commodity markets are full of tales of producers and traders, fromMetallgesellschaftto Sumitomo, that blurred the lines between hedging and speculation and ended with billions of dollars in losses. 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. Perdagangan nikel di LME dihentikan sementara sejak Selasa lalu. 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Tsingshan agreed standstill with JPMorgan-led group of banks, Talks continue on loan facility to backstop short position. The LME was forced to suspend nickel trading for the first time since 1988 on March 8 and is trying to facilitate negotiations to net off long and short positions in order to reopen the market. FY18 RESULTS, FY19 GUIDANCE AND CORPORATE PRESENTATION 22 AUGUST 2018 AGENDA Results Guidance Corporate Operations Growth Exploration Nickel Market DISCLAIMER AND FORWARD 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. But the effects of the short squeeze are likely to be felt in other ways. CCBI Global Markets is another creditor, two separate sources said. 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. 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. our Subscriber Agreement and by copyright law. You should never trade more than you can afford to lose. Still, this weeks short squeeze is nonetheless likely to push costs higher for battery companies and stainless steel makers, eventually feeding through into the price of everyday goods. Assessing the Incremental Costs of Regulation and Supervision Faced by EU Banks Compared to Their US Peers, Interview with Mr. lvaro Saboro, Chief Executive Officer, Grupo Financiero BCT. 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 . 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. 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. The new historic high is nearly twice the previous record of $51,600 in 2007. Why? The metal is found in all our homes as a key ingredient of stainless steel. 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. Why is nickel going up so drastically in a short period of time? CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Bloombergs Joe Deaux reports. 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. Things seemed calm at first: Prices were hovering around US$50,000 a ton, and he went to bed. The company had a further 120,000 tons or more in short positions off the exchange, in bilateral deals with such banks as JPMorgan Chase & Co. and Standard Chartered Plc. It was a classic short squeeze, as the pain for Tsingshan, its brokers, and other shorts created a self-reinforcing cycle. Terms & Conditions Finance Publishing Several large brokers got margin calls of close to US$1 billion each over the course of the day. The London nickel market has been closed since last Tuesday morning, when the exchange intervened after prices spiked as much as 250% in two days, and the standstill announced by Xiang's. read more. They held a hurried call on Monday evening, but decided to allow the nickel market to continue trading. 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. 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. Zhejiang Huayou Cobalt plans to discuss an application to register the company's nickel for delivery on the exchange. See here for a complete list of exchanges and delays. The major market events for the week ahead right in your inbox. Sanctions imposed on Russia ignited market concern that Russia-origin nickel may be banned in Europe, which could cause a global supply deficit. Reuters provides business, financial, national and international news to professionals via desktop terminals, the world's media organizations, industry events and directly to consumers. 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 . Follow the topics, people and companies that matter to you. 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. 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 . 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. . Investors who had booked trades during the chaotic session in the early hours of Tuesdaywere furious. Screen for heightened risk individual and entities globally to help uncover hidden risks in business relationships and human networks. He started increasing his short position on the London Metal Exchange. 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. Xiang Guangda, who controls the worlds largest nickel producer, Tsingshan Holding, and is known as Big Shot in Chinese commodity circles, has closed out part of his companys short position and is considering whether to exit the wager altogether, the people said. Tsingshan and others had to buy . The prices that were being seen during that Asian session were becoming disconnected from, I believe, physical reality.. Executives at Tower Research Capital, one of Wall Streets oldest electronic market-makers, reined in its trading activity on the LME and put its membership in the exchange under review. Exchanges sometimes cancel trades when technology glitches or fat fingers cause one-off mistakes. This report studies the Ferronickel market, covering market size for segment by type (Ferronickel (Nickel15%), Ferronickel (Nickel15-25%), etc. The tightness in the market had been exacerbated by the presence of an unidentified trader who, according to exchange data, controlled somewhere between 50 per cent and 80 per cent of nickel warehouse warrants monitored by the LME as of last month. Matthew Chamberlain speaks on "Bloomberg Markets: Europe.". Jack Farchy, Alfred Cang and Mark Burton, Bloomberg News. 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LME brokers and their clients were hit with margin call after margin call. document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Copyright International Banker 2023 | All Rights Reserved Subscription | About us | The most comprehensive solution to manage all your complex and ever-expanding tax and compliance needs. 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. 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.. Trading and mining giant Glencore was the dominant holder of nickel in recent months, according to people familiar with the matter. . Tsingshan has been struggling to pay margin calls to its brokers, according to people familiar with the situation. . (HNI) to produce higher-grade nickel matte. The difference between trading assets and CFDs. The unprecedented rally prompted the 145-year-old exchange to suspend nickel trading Tuesday. The Chinese nickel tycoon whose big short position caused chaos reached a deal with his banks to avoid further margin calls, marking a key step toward restoring stability to the market after an unprecedented squeeze. Distribution and use of this material are governed by 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. To resume Wednesday the effects of the day tax and compliance needs US $ 100,000 ton! You should never trade more than you can afford to lose most of the available nickel in LME.. 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