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 . 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. The Morowali park mainly produces nickel pig iron for stainless steel. The most comprehensive solution to manage all your complex and ever-expanding tax and compliance needs. 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 . Moscow's invasion of Ukraine and the west's moves to sanction Russia, a key major supplier, have electrified an already bullish nickel market. 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. Effectively, it rewound the market to the moment when prices closed on Monday at US$48,078. read more. At the center of the action is Chinese nickel titan Tsingshan Holding Group, the worlds biggest producer of a metal used in stainless steel and .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;}electric-vehicle batteries. "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. Creditors and banks who acted for Tsingshan were demanding margin settlements and the closing of all positions. It should be mentioned that nickel had already rallied to $25,000 in January before easing off by the end of the month. Neither party seems very keen on this idea, however. Based on the close on Friday night at $29,130, the LME were raising initial margins to a prudent 7.72% of the contract value. Several large brokers got margin calls of close to US$1 billion each over the course of the day. A short squeeze is a market condition caused by massive short positions. Tsingshan yang dimiliki oleh swasta secara harfiah memiliki arti "gunung hijau", berbasis di kota Wenzhou di China dan memiliki . 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. Most market participants expect nickel prices to come back down once the crisis around Xiangs position has been resolved. 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. 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. 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. Tsingshan debacle exposes weak underbelly of LME. 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 . Four or five of the brokerages that are LME members would have failed, a shock that could have devastated the global metals industry. Prices for the metal, used in stainless steel and electric vehicle batteries, were last in that range in December. At the current price of nickel, the brokers themselves wouldnt be able to pay their margin calls, they told the LME. Pleased to report an extremely strong year for the Nickel Industries and the. While Russias nickel exports havent been targeted by sanctions, U.S. and European buyers have nonetheless sought alternatives to Russian sources. 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. And never trade money that you cannot afford to lose. A Glencore spokesman declined to comment. 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. Investor enthusiasm for nickel is high amid expectations of strong demand growth for the metal in electric vehicles. . Today, Tsingshan is the biggest nickel producer in the world, accounting for around 20% of the global market. Solugen Bio has built a chemical plant that produces all manner of chemical-based products using bio-based feedstock instead of fossil fuels. 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. Soon Chamberlain and other executives at the exchange began receiving frantic phone calls from LME brokers. Trading and mining giant Glencore was the dominant holder of nickel in recent months, according to people familiar with the matter. A sharp surge in nickel prices triggered margin call fears at the London Metal Exchange which suspended trading after prices doubled in hours. All quotes delayed a minimum of 15 minutes. Forbes places Xiang's real-time net worth at $1.2 billion. For the LME, the future isunclear. He draws a comparison with Silver Thursday, the day in 1980 when an attempt bythe Hunt brothersto corner the silver market came unstuck. Follow the topics, people and companies that matter to you. If nickel prices stay lofty it could complicate the energy transition with electric vehicle batteries costing more to produce. read most from bloomberg The head of one London metals brokerage recalls feeling sick as he watched the moves, realizing what the spike in prices would mean for his company, the market, and the global metals industry. At 1 a.m. on Tuesday, the market opened. It had sold nickel forward on the markets, betting on the price going down, not up. And thank you everyone for your attendance on today's call for the Nickel Industries Full Year 2022 Results. https://www.wsj.com/articles/nickel-market-crisis-sends-london-metal-exchange-scrambling-to-prevent-damage-11646858558. 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. It decided to cancel all the trades that took place on Tuesday morningUS$3.9 billion of them, according to a Bloomberg calculation. LME brokers and their clients were hit with margin call after margin call. 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. Tsingshan's 2022 nickel equivalent output is . 3.1 What is the margin call to Tsingshan? Others in the market may also push up prices in anticipation of that short covering. Reuters, the news and media division of Thomson Reuters, is the worlds largest multimedia news provider, reaching billions of people worldwide every day. Matthew Chamberlain, the LMEs chief executive officer, had stayed up to watch. 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. The difference is that nickel is a commodity that touches the entire global economy. The price was frozen, below the record high but still at US$80,000 a ton. The big fear was that Tsingshan would struggle to make margin calls with its bankers, potentially facing billions of dollars in losses. Xiangs short position has now racked upbillions of dollars in losses. 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. Tsingshan, the world's largest stainless steel producer, is rumoured to have built a big short position in nickel before a 250% rally in [] The spike was driven in large part by a short squeeze centered on Chinese tycoon Xiang Guangda, who hadamassed a big wagerthat nickel prices would fall through his company Tsingshan Holding Group Co. 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. 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 . Financial markets are on edge after the London Metal Exchange last week granted a reprieve to the giant Chinese nickel producer, which . JPMorgan Chase & Co (JPM.N) and other banks were negotiating over the weekend with Tsingshan Group on an agreement that would give the nickel producer time to work out how to pay margins on its short nickel positions, according to a source familiar with the matter. The majority of retail investor accounts lose money when trading CFDs. Reuters provides business, financial, national and international news to professionals via desktop terminals, the world's media organizations, industry events and directly to consumers. ), by application (Stainless Steel Industry, Electronics Industry, etc. Russia is the worlds third-largest producer of nickel and its largest exporter of refined nickel metalthe type deliverable on the LME. But nothing could prepare the market for what was about to follow, with the Russia-Ukraine conflict sending prices skywards on global supply concerns. That would come on top of any losses incurred by the tycoon since he began building the short position late last year through closely held Tsingshan. Tsingshan has been struggling to pay margin calls to its brokers, according to people familiar with the situation. The Chinese government may also play a role. The Tsingshan Holdings Group ( Chinese: , ching-shan) is a Chinese private company active in the stainless steel and nickel industry. 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. 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. Are you considering whether or not to trade nickel or want to learn more about the market? The Companys registered office is at Bahamas Financial Centre, 3rd Floor, Shirley and Charlotte Street, P.O. 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. 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.. Some aggrieved traders are already preparing to take legal action against the exchange. Join the 500.000+ traders worldwide that chose to trade with Capital.com, Also you can contact us: ), by sales channel (Direct Channel, Distribution Channel), by player (Shandong Xinhai Technology, Tsingshan Holding Group, Eramet, Linyi Yichen Alloy, Jiangsu Delong Nickel Industry . Xiang Guangda in 2017. For non-personal use or to order multiple copies, please contact 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. US manufacturing sector contracts again; raw material prices rise, U.S. House panel approves bill giving Biden power to ban TikTok, Additional reporting by Eric Onstad in London, by the Beijing newsroom and Min Zhang in Beijing; editing by Carmel Crimmins, Exclusive: Tesla readies revamp of Model Y codenamed 'Juniper', EV startups from Lucid to Rivian see demand fade, supply chain issues linger, Lilly to cut some list prices by 70% and offer $25 insulin, Exclusive: Biden administration to move on Midwest ethanol-blended gasoline rule this week -sources, Exclusive news, data and analytics for financial market professionals. 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 the fourth quarter, the company expects to generate "high single-digit. The prices that were being seen during that Asian session were becoming disconnected from, I believe, physical reality.. 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. Privacy Policy | Nickel prices have since fallen and the three-month nickel last settled at $23,371/tonne on 3 November. Tsingshan has been finding it difficult to pay margin calls to its creditors, the report said. Tsingshan has secured credit promises from banks including JPMorgan Chase & Co. and China Construction Bank that could allow it to avoid defaulting on its margin calls, Bloomberg reported. Reuters could not determine how large Tsingshan's short position currently is after it cut its exposure. 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. 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. See here for a complete list of exchanges and delays. Tsingshan has said it has secured facilities with its consortium banks and will exit its position in an orderly manner. Perdagangan nikel di LME dihentikan sementara sejak Selasa lalu. 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 . 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. 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 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. The LME is now very likely going to die a slow, self-inflicted death through the loss of confidence in it and its products, predicted Thompson in a tweet. 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. For most of the past decade, theyd traded between US$10,000 and US$20,000. 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. Box N-4865, Nassau, Bahamas. Beijing is supportive of him, Xiang told contacts recently. Tsingshan was unable meet margin calls and only avoided bankruptcy after . Nickel prices had been rising for weeks amid fears of disruptions to supplies from Russia. Continue reading your article witha WSJ subscription, Already a member? articles a month for anyone to read, even non-subscribers! 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. 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. 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. 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 above the $20,000/metric tonne (mt) mark on the upside before 2022. 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. 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. Li Huan/Red Star News/VCG via Getty Images. Indeed, Russia is the worlds third-biggest nickel producer after Indonesia and the Philippines. 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. However, the short position holders have to pay a margin. Traders must deposit cash, known as margin, with their brokers on a regular basis to cover potential losses on their positions. The LME did not put it into default, instead giving it more time to pay. Its unclear whether he will get his way. Tsingshan, among other Chinese companies, is ramping up a wave of new battery-grade nickel capacity in Indonesia. Nickel short interest was created by Tsingshan. 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. 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. Distribution and use of this material are governed by This copy is for your personal, non-commercial use only. But according to Bloomberg, the LME refrained from putting it into default, which allowed the broker to settle the margin calls the following day after several clients, including Tsingshan, received loans to cover their positions. 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 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. 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. 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. 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 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. Browse an unrivalled portfolio of real-time and historical market data and insights from worldwide sources and experts. 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 fear was that Tsingshan could not make its margin calls, interim payments to parties on the other side of the trade. They held a hurried call on Monday evening, but decided to allow the nickel market to continue trading. Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com. Why? 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. 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. But since last year, Tsingshan has also started to produce a source of nickel for batteries. The material provided on this website is for information purposes only and should not be understood as an investment advice. Some have also warned that much of the chaos in the nickel market may not be over yet. Solugen Bio has built a chemical plant that produces all manner of chemical-based products using bio-based feedstock instead of fossil fuels. 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 London Metal Exchange initially announced rule changes late Monday in respond to a daily spike of as much of 90% (Reuters) Nickel, used in stainless steel and electric-vehicle batteries . Nickel prices usually move a few hundred dollars per ton in a day. Now they had to pay big margin calls on the exchange while receiving no margin from their client. 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. FY18 RESULTS, FY19 GUIDANCE AND CORPORATE PRESENTATION 22 AUGUST 2018 AGENDA Results Guidance Corporate Operations Growth Exploration Nickel Market DISCLAIMER AND FORWARD Nickel short interest was created by Tsingshan. UNFORGIVEABLE,tweetedMark Thompson, a former trader at Trafigura and Apollo. 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.. The metal is found in all our homes as a key ingredient of stainless steel. 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. At 8:15 a.m., the screens stopped flashing, hours before the in-person pit trading session was even set to begin. Our Standards: The Thomson Reuters Trust Principles. CCBI Global Markets is another creditor, two separate sources said. Now, people familiar with the matter say, the exchange is likely to introduce such measures as position limits and greater transparency. Why bet against nickel when you have a nickel business? (Podcast). 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. The fallout was immediate. Exchanges. However, for business days 7th and 8th March, they would remain at . The metals industry, financial regulators and Chinese officials rushed to resolve a crisis in Londons nickel market, which remained on ice after an ill-fated trade sparked mammoth price gains and billions of dollars of losses. Chinese nickel giant Tsingshan's hedge backfired Commodities companies of course generally benefit from higher prices for their products. On March 8,2022 price of Nickel went suddenly up $100 per kilogram . read more. Then in . Nikel Terbang, Pemilik Smelter RI Asal China Rugi Rp 115 T. Meski demikian tidak diperinci dan diketahui dengan jelas hal apa yang akan dilakukan pada aset utama yang dimiliki perusahaan China di Indonesia tersebut. Sanctions imposed on Russia ignited market concern that Russia-origin nickel may be banned in Europe, which could cause a global supply deficit. 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. Still, the LME has weathered numerousscandalsbefore in its 145-year history, from a 1985crisis in the tin marketthat caused many brokers to go out of business to the incident when a trader at Sumitomo hid more than US$2 billion in losses. But to hedge against a a drop in prices, they use. It also doesn't create waste and may help fight the climate crisis. 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. Q. Only you can decide whether nickel is a good buy or not. NIC's operations and cash flow remained stable in 2022 despite Tsingshan's significant loss on its nickel short position in March 2022. You should do your own research, looking at the latest news, technical analysis, and analyst commentary before trading. 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. Investors who had booked trades during the chaotic session in the early hours of Tuesdaywere furious. 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. [2] It moved into the Indonesian nickel industry in 2009. The LME made a near-unprecedented decision. Some think this could herald the end of the exchange itself. For a while, it wasunclear which view of the market would prevail. Among them were some of the biggest names on Wall Street. Not surprisingly, investors have not been particularly satisfied with the LMEs actionsor lack thereofin allowing this situation to transpire. Help using this website - Accessibility statement. Tsingshan has been struggling to pay margin calls to its brokers, according to people familiar with the situation. As such, if Tsingshan can weather the losses on its LME positions, the higher prices could yet benefit its core business of producing nickel and stainless steel. The new historic high is nearly twice the previous record of $51,600 in 2007. 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%. Is the Strength of Big Tech Regulation Sufficient at Present? Tsingshan is also a nickel miner and operates nickel pig iron mines and production facilities. 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. 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