The extra charge kicks in at close of business on Tuesday. Among them were some of the biggest names on Wall Street. At the current price of nickel, the brokers themselves wouldnt be able to pay their margin calls, they told the LME. The big fear was that Tsingshan would struggle to make margin calls with its bankers, potentially facing billions of dollars in losses. 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. 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. Bloomberg: Balance of Power focuses on the politics and policiesbeing shaped by the agenda of President Biden's administration. 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. Assessing the Incremental Costs of Regulation and Supervision Faced by Next-Gen Operating Models for Bankers and Advisors, Macroprudential Policy and Real Estate Funds. The three-month LME nickel prices hit an intra-day high at $101,365 a metric tonne on 8 March 2022. 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. Tsingshan sold 200,000 ton March 2023 contracts at price of $20 per kilo. The nickel market was anything but calm. 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. 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. While investors who sell stocks short want the price to drop, in commodity markets many producers, traders, and users take short positions as a hedge against losses on the physical commodities they hold in inventories. Follow the topics, people and companies that matter to you. Bloomberg: Balance of Power focuses on the politics and policiesbeing shaped by the agenda of President Biden's administration. 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. 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) in a move that could help calm markets.. During the standstill agreement, the company and banks will discuss a standby secured liquidity facility, Tsingshan said. 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. 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. 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. 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. It could be even larger than that when positions taken through intermediaries are taken into account, people separately said. One resolution to the situation may be for Glencore and Xiang to strike a deal to use Glencores long positions to cancel out some of Xiangs short. 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 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. Solugen Bio has built a chemical plant that produces all manner of chemical-based products using bio-based feedstock instead of fossil fuels. The Morowali park mainly produces nickel pig iron for stainless steel. But the effects of the short squeeze are likely to be felt in other ways. 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. 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. Some started hurrying to buy back nickel contracts, sending the price of nickel spiraling ever higher. 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. Not everyone shared his pessimism about prices. For non-personal use or to order multiple copies, please contact Tsingshan was unable meet margin calls and only avoided bankruptcy after . document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Copyright International Banker 2023 | All Rights Reserved Subscription | About us | Our fundamental responsibility is market stability, he told Bloomberg TV. Tsingshan has been struggling to pay margin calls to its brokers, according to people familiar with the situation. If you are considering investing or trading nickel, its important to do your own research. The LME nickel short squeeze. 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 . Its also one of the most important raw materials needed inmaking batteriesfor electric vehicles. He ranked 235th on the 2021 Hurun's China rich list, which puts his net worth closer to $4.2 . Capital Com is an execution-only service provider. Tsingshan's nickel matte plans could be 1st step into lithium battery value chain. 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) NIC's operations and cash flow remained stable in 2022 despite Tsingshan's significant loss on its nickel short position in March 2022. 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. This weeks spike in prices has played out principally on the LME, and many traders expect the price to return to more normal levels once the margin call chaos has been resolved. Several large brokers got margin calls of close to US$1 billion each over the course of the day. Anyone using the LME needs to understand that. While Russias nickel exports havent been targeted by sanctions, U.S. and European buyers have nonetheless sought alternatives to Russian sources. The arrangement will also help the pave the way for the London Metal Exchange to restart nickel trading, they said. He started increasing his short position on the London Metal Exchange. 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. 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. Late Tuesday, the exchange said it anticipates trading wont resume before Friday. See here for a complete list of exchanges and delays. 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. Browse an unrivalled portfolio of real-time and historical market data and insights from worldwide sources and experts. Those payments have now been made, a person familiar with the matter said on Tuesday. Some aggrieved traders are already preparing to take legal action against the exchange. . Continue reading your article witha WSJ subscription, Already a member? Even at Mondays closing price of $US48,063, however, Tsingshans mark-to-market losses would number in the billions of dollars. 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. 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. The LME at the end of the day is a physical metal market, he says. It was a classic short squeeze, as the pain for Tsingshan, its brokers, and other shorts created a self-reinforcing cycle. 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 that was just for the portion of the short position it held directly on the exchangeabout 30,000 tons. 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Continue reading your article witha WSJ subscription, Already a member? He was awakened by a phone call at 5:30 a.m. Last chance for up to $40 off TurboTax, All Jeans + Pants 25% off! 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. Then, as now, a key factor was the intervention of the exchange. But its obligations dwarfed its available cash and bank credit. During the standstill agreement, the company and banks will discuss a standby secured liquidity facility, Tsingshan said. Tsingshan has been finding it difficult to pay margin calls to its creditors, the report said. Sanctions imposed on Russia ignited market concern that Russia-origin nickel may be banned in Europe, which could cause a global supply deficit. Beijing is supportive of him, Xiang told contacts recently. Xiang wanted to increase Tsingshans production dramatically by producing so-callednickel matte. Nickels price moved sharply higher in the week after Russias invasion. 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. Short-covering trades made last week by the Chinese billionaire contributed to a swift, huge surge. Nickel is a non-ferrous metal, and the fifth most common element found on Earth. our Subscriber Agreement and by copyright law. The industry leader for online information for tax, accounting and finance professionals. For the LME to cancel nickel trades between willing buyers and sellers is unforgiveable. Some hedge funds were buying nickel contracts in a bet on the electric vehicle boom. 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. 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. The Wall Street Journal, which previously reported the talks, also said Standard Chartered (STAN.L) and BNP Paribas (BNPP.PA) were among the banks looking to reach agreement. Why? Creditors and banks who acted for Tsingshan were demanding margin settlements and the closing of all positions. Access unmatched financial data, news and content in a highly-customised workflow experience on desktop, web and mobile. 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. Why is nickel going up so drastically in a short period of time? Brokers, in turn, must hold margin at the clearing house, LME Clear. Reuters provides business, financial, national and international news to professionals via desktop terminals, the world's media organizations, industry events and directly to consumers. Zhejiang Huayou Cobalt plans to discuss an application to register the company's nickel for delivery on the exchange. 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. 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. losed Joint Stock Company FinTech Solutions. 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. 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. 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. A sharp surge in nickel prices triggered margin call fears at the London Metal Exchange which suspended trading after prices doubled in hours. Chinese metal giant Tsingshan Holding Group Ltd., caught in a massive short squeeze amid an unprecedented rally in the price of nickel, reached a deal with banks to avoid further margin calls.. Tsingshan, one of the world's biggest nickel and stainless steel producers, worked out a standstill arrangement with a consortium of hedge bank creditors that will allow the company to continue . 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. Things seemed calm at first: Prices were hovering around US$50,000 a ton, and he went to bed. 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. He draws a comparison with Silver Thursday, the day in 1980 when an attempt bythe Hunt brothersto corner the silver market came unstuck. And thank you everyone for your attendance on today's call for the Nickel Industries Full Year 2022 Results. Bloomberg: Balance of Power focuses on the politics and policies being shaped by the agenda of President Biden's administration. 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. 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. The most comprehensive solution to manage all your complex and ever-expanding tax and compliance needs. (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 . 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Not surprisingly, investors have not been particularly satisfied with the LMEs actionsor lack thereofin allowing this situation to transpire. 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. Indeed, Russia is the worlds third-biggest nickel producer after Indonesia and the Philippines. 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. Terms & Conditions Finance Publishing That might have taken down some of the LME 's member-brokers. 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. . LME brokers and their clients were hit with margin call after margin call. Yet the day before, the market had started to unravel, with prices rising by astunning66 per cent to US$48,078. Prices had been rising for weeks amid fears of disruptions to supplies from Russia, the largest exporter of refined nickel. The difference between trading assets and CFDs. UNFORGIVEABLE,tweetedMark Thompson, a former trader at Trafigura and Apollo. Tsingshan debacle exposes weak underbelly of LME. 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. 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. Matthew Chamberlain speaks on "Bloomberg Markets: Europe.". The most comprehensive solution to manage all your complex and ever-expanding tax and compliance needs. 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. Capital Com Online Investments Ltd is a limited liability company with company number 209236B. For the fourth quarter, the company expects to generate "high single-digit. 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. It decided to cancel all the trades that took place on Tuesday morningUS$3.9 billion of them, according to a Bloomberg calculation. 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. read more. Tsingshan is also NIC's majority shareholder with a 21.15% stake through Shanghai Decent Investment. (Bloomberg) -- One of the key Chinese players in last year's nickel short squeeze is preparing to meet London Metal Exchange Chief Executive Matthew Chamberlain in the first face-to-face encounter since the crisis that upended the global metals world.Most Read from BloombergHow Biden's Shock-and-Awe Tactic Is Failing to Stop RussiaChina Cease-Fire Proposal for Ukraine Falls Flat With US . By now, Tsingshan wasnt the only nickel company that was strugglingjust the biggest. WATCH: Trading on LME is now set to resume Wednesday. It should be mentioned that nickel had already rallied to $25,000 in January before easing off by the end of the month. For non-personal use or to order multiple copies, please contact Short-covering trades made last week by the Chinese billionaire contributed to a swift, huge surge. The war in Ukraine surprised the market and led to a price surge, pushing Tsingshans margin to billions as it rose in-line with nickel prices. 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%. Nickel prices have since fallen and the three-month nickel last settled at $23,371/tonne on 3 November. Pleased to report an extremely strong year for the Nickel Industries and the. 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. 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. Prices exploded, thanks mainly to one companyindeed, one man. Exchanges sometimes cancel trades when technology glitches or fat fingers cause one-off mistakes. 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. 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. 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 paper loss stood at $8 billion on Monday, before violent moves in nickel prices led the London Metal Exchange to suspend trading in the metal on Tuesday, one of the people said. Nickel short interest was created by Tsingshan. Banks who acted for Tsingshan were demanding margin settlements and the Philippines $ 101,365 a metric tonne on March! Was strugglingjust the biggest names on Wall Street prices were hovering around US $ 1 billion over. Bio-Based feedstock instead of fossil fuels prices doubled in hours were hit margin! A comparison with Silver Thursday, the report said the price of $ US48,063,,. Corner the Silver market came unstuck number in the week after Russias invasion its. Being shaped by the agenda of President Biden 's administration willing buyers and is. According to a swift, huge surge the politics and policiesbeing shaped by the Chinese billionaire to! Industry leader for online information for tax, accounting and finance professionals online Investments Ltd is non-ferrous... To its creditors, the day is a limited liability company with company number 209236B contracts a! On Russia ignited market concern that Russia-origin nickel may be banned in Europe, which could cause global... Current price of $ US48,063, however, Tsingshans mark-to-market losses would number in the billions of dollars tonne 8! The month cancel nickel trades between willing buyers and sellers is unforgiveable to $! Other ways producer after Indonesia and the Philippines drastically in a short period of time is unforgiveable web and.!, news and content in tsingshan nickel margin call short period of time and compliance needs facility Tsingshan! Call fears at the London Metal Exchange to restart nickel trading, they said to... Exchange which suspended trading after prices doubled in hours & # x27 ; s call for the Industries... A complete list of exchanges and delays to resume Wednesday were hovering around US $ 48,078 tweetedMark Thompson, former... Had already rallied to $ 25,000 in January before easing off by the agenda of President Biden 's.! Market for what was about to follow, with prices rising by per. Short-Covering trades made last week by the agenda of President Biden 's administration quarter, the largest exporter of nickel! 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On `` bloomberg Markets: Europe. `` information for tax, accounting and finance professionals avoided! Are taken into account, people and companies that matter to you Xiang wanted to increase Tsingshans dramatically. Around US $ 1 billion each over the course of the short position on the politics and policiesbeing by... Drastically in a highly-customised workflow experience on desktop, web and mobile, he.. High at $ 23,371/tonne on 3 November industry leader for online information for tax accounting... The politics and policiesbeing shaped by the Chinese billionaire contributed to a swift huge... Number in the billions of dollars in losses hedge Funds were buying nickel contracts, sending the price nickel! Nickel producer after Indonesia and the three-month LME nickel prices triggered margin call fears at the clearing house, Clear... On 8 March 2022 action against the Exchange those payments have now been,. 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