It also doesn't create waste and may help fight the climate crisis. Tsingshan is an excellent Chinese enterprise, and our positions and operations dont have any problems.. Xiang didnt believe the rally would last. Tsingshan's difficulties paying its margin calls have put its . Matthew Chamberlain, the LMEs chief executive officer, had stayed up to watch. Build the strongest argument relying on authoritative content, attorney-editor expertise, and industry defining technology. Things seemed calm at first: Prices were hovering around US$50,000 a ton, and he went to bed. It decided to cancel all the trades that took place on Tuesday morningUS$3.9 billion of them, according to a Bloomberg calculation. Tsingshan accounted for about half that amount. The banks declined comment or did not respond to a request for comment. Browse an unrivalled portfolio of real-time and historical market data and insights from worldwide sources and experts. ", 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. Save my name, email, and website in this browser for the next time I comment. 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. Weve received a lot of phone calls today, he said. Those 18 minutes will haunt me, says the executive, who wasnt authorized to speak publicly. 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. 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. Traders must deposit cash, known as margin, with their brokers on a regular basis to cover potential losses on their positions. Several large brokers got margin calls of close to US$1 billion each over the course of the day. If the market moves against those positions, they receive a margin call requesting further funds and if they fail to pay, they can be forced to close their position. "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. 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 Xiangs Tsingshan Group Holding Co. could provide the certainty needed to restart trading. We expect the EBITDA margin to be around . Tsingshan agreed standstill with JPMorgan-led group of banks, Talks continue on loan facility to backstop short position. . 3.1 What is the margin call to Tsingshan? 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. This report studies the Ferronickel market, covering market size for segment by type (Ferronickel (Nickel15%), Ferronickel (Nickel15-25%), etc. Its also one of the most important raw materials needed inmaking batteriesfor electric vehicles. Traders must deposit cash,. Tsingshan has been struggling to pay margin calls to its brokers, according to people familiar with the situation. 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 price moves exacerbated the pressure on holders of big short positions, already facing calls to deposit extra funds with brokers, a practice known in financial markets as margin calls. 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. This is a fee deposit with a counterparty (often the brokers or exchange) to cover some of the credit risk undertaken to take a short position. Contact us | Bloomberg: Balance of Power focuses on the politics and policiesbeing shaped by the agenda of President Biden's administration. For Xiangs big short position, that was painful. Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com. Another key factor in the recent price volatility was the massive nickel short squeeze built up by Chinas Tsingshan Holding Group, the worlds largest stainless steel producer. 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 . 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. The Morowali park mainly produces nickel pig iron for stainless steel. 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. Creditors and banks who acted for Tsingshan were demanding margin settlements and the closing of all positions. But now, serious questions are being raised over the LMEs lack of foresight in not anticipating this incident, especially given the sheer size of Tsingshans short position, which it began to compile last year. Trading and mining giant Glencore was the dominant holder of nickel in recent months, according to people familiar with the matter. 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. About 50,000 tonnes of Xiang's total nickel short position of over 150,000 tonnes is held through an over-the-counter position with JP Morgan, which means Tsingshan owed the bank about US$1 . By April, nickel prices began to fall below $35,000/tonne and Tsingshan began to close its short positions and settled its margin calls. 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 For the LME, the future isunclear. 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. For participants in commodities exchanges, a price rally is not necessarily good news. 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. As the price rose through the London day after offices in Asia had closed, Tsingshan started struggling to pay, the people say. WATCH: Trading on LME is now set to resume Wednesday. Only you can decide whether nickel is a good buy or not. The new historic high is nearly twice the previous record of $51,600 in 2007. The prices that were being seen during that Asian session were becoming disconnected from, I believe, physical reality.. It had sold nickel forward on the markets, betting on the price going down, not up. 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. Most market participants expect nickel prices to come back down once the crisis around Xiangs position has been resolved. Is the US Finally Warming to the Possibility of Creating a CBDC? 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. . articles a month for anyone to read, even non-subscribers! . That put Tsingshans banks and brokers, which include JPMorgan Chase, BNP Paribas, and Standard Chartered,in a bind. Not surprisingly, investors have not been particularly satisfied with the LMEs actionsor lack thereofin allowing this situation to transpire. An employee. "For the period of the standstill, the participating hedge banks agree not to close out positions against Tsingshan or to make further margin calls in respect of existing positions. Four or five of the brokerages that are LME members would have failed, a shock that could have devastated the global metals industry. Bloombergs Joe Deaux reports. Anyone using the LME needs to understand that. Traders often hold this strategy when they believe the price of a security will fall in the future, which will allow them to buy low and sell high. 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. 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. 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. 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. Everything changed when Russia invaded Ukraine. But its obligations dwarfed its available cash and bank credit. Is the Strength of Big Tech Regulation Sufficient at Present? Then on March 7, nickel's price began its parabolic. Some started hurrying to buy back nickel contracts, sending the price of nickel spiraling ever higher. Others in the market may also push up prices in anticipation of that short covering. https://www.wsj.com/articles/chinese-nickel-giant-tsingshan-faces-8-billion-trading-loss-as-ukraine-war-upends-market-11646765353. Moscow's invasion of Ukraine and the west's moves to sanction Russia, a key major supplier, have electrified an already bullish nickel market. (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 . And that was just for the portion of the short position it held directly on the exchangeabout 30,000 tons. Reuters provides business, financial, national and international news to professionals via desktop terminals, the world's media organizations, industry events and directly to consumers. At $2,250 a tonne, the capital required on 300,000 tonnes of nickel would be $675 million, according to Reuters calculations. Jack Farchy, Alfred Cang and Mark Burton, Bloomberg News. But nothing could prepare the market for what was about to follow, with the Russia-Ukraine conflict sending prices skywards on global supply concerns. And once again, this short squeeze racked up billions in losses for those involved. Most analysts sided with Xiang, at least in the medium term, believing that nickel productionled by Tsingshan and its competitors in Indonesiawould outpace demand. Some hedge funds were buying nickel contracts in a bet on the electric vehicle boom. Zhejiang Huayou Cobalt plans to discuss an application to register the company's nickel for delivery on the exchange. Distribution and use of this material are governed by By now, Tsingshan wasnt the only nickel company that was strugglingjust the biggest. 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 major market events for the week ahead right in your inbox. 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. 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