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. Is the US Finally Warming to the Possibility of Creating a CBDC? 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. Comparable-store sales rose 19.3% in fiscal 2020 and grew another 14.4% year over year in the first nine months of 2021. Assessing the Incremental Costs of Regulation and Supervision Faced by Next-Gen Operating Models for Bankers and Advisors, Macroprudential Policy and Real Estate Funds. 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 . 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. A week earlier, nickel was trading around $25,000 and the price of the metal has more than quadrupled in a matter of days. 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. 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. Tsingshan's difficulties in paying its margin calls, and the company's ongoing bailout negotiations, have put its banks and brokers in a bind, as they have had to make hefty margin calls of their own at the LME to cover their short positions on the exchange. Advertise | Careers | Editorial Guidelines | This exact scenario emerged in early March in the LMEs nickel market following the escalation of the Russia-Ukraine military conflict, with Chinese nickel-maker Tsingshan Holding Group the unfortunate short seller in this episode. Why bet against nickel when you have a nickel business? Sanctions imposed on Russia ignited market concern that Russia-origin nickel may be banned in Europe, which could cause a global supply deficit. Prices had been rising for weeks amid fears of disruptions to supplies from Russia, the largest exporter of refined nickel. If nickel prices stay lofty it could complicate the energy transition with electric vehicle batteries costing more to produce. 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. 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. Mampukan Tsingshan bertahan? 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. 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. 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. 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. Metal industry sources said that for the duration of the standstill agreement Tsingshan, the world's largest nickel producer, may not have to buy any more metal to cover its short positions. Tsingshan was unable meet margin calls and only avoided bankruptcy after . He draws a comparison with Silver Thursday, the day in 1980 when an attempt bythe Hunt brothersto corner the silver market came unstuck. "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. 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. Now, the traders watched with a mixture of horror and grim fascination as the price went vertical. . Several large brokers got margin calls of close to US$1 billion each over the course of the day. Nickel prices shot up as much as 250% in two days on the LME at the start of this week. By April, nickel prices began to fall below $35,000/tonne and Tsingshan began to close its short positions and settled its margin calls. The super spike was driven by holders of short positions, including Tsingshan and its brokers, rushing to close them out. Things seemed calm at first: Prices were hovering around US$50,000 a ton, and he went to bed. At $2,250 a tonne, the capital required on 300,000 tonnes of nickel would be $675 million, according to Reuters calculations. 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. The LME convened its special committee, a small group of metals and legal experts with the power to issue emergency rules for the market. Chinese entrepreneur Xiang Guangda has been caught out by nickel's price surge. Reuters provides business, financial, national and international news to professionals via desktop terminals, the world's media organizations, industry events and directly to consumers. Reuters could not determine how large Tsingshan's short position currently is after it cut its exposure. We do not make any representations or warranty on the accuracy or completeness of the information that is provided on this page. Is the Strength of Big Tech Regulation Sufficient at Present? . Nickel prices have since fallen and the three-month nickel last settled at $23,371/tonne on 3 November. 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. 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. For non-personal use or to order multiple copies, please contact We expect the LME nickel price to remain volatile in the near term, as the global nickel market finds equilibrium following recent events, S&Ps Sappor added, warning that an elevated risk of another short squeeze hitting the LME nickel market in the near term continued, given the presence of both a dominant warrant-holding position on available LME stocks and Tsingshans short position. The London Metal Exchange plans to resume trading in nickel, a week after it was suspended when the price of the metal surged to over $100,000 a ton. Those payments have now been made, a person familiar with the matter said on Tuesday. 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. 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. 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. Tsingshan accounted for about half that amount. Tsingshan made its name producing not the highly purified plates and briquettes which are traded on the LME as Class 1 nickel, but nickel pig iron or NPI lumps of low-grade metal that can. As the market was picking up on the short squeeze of Tsingshan, the LME had decided to intervene. Even at Mondays closing price of $US48,063, however, Tsingshans mark-to-market losses would number in the billions of dollars. The Initial Margin was $20,000 per contract. 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 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. Bloomberg: Balance of Power focuses on the politics and policies being shaped by the agenda of President Biden's administration. The LME did not put it into default, instead giving it more time to pay. The company paid at least some of its margin calls early on Monday, according to a person familiar with the matter. 2023 Capital Com Online Investments Ltd. [2] It moved into the Indonesian nickel industry in 2009. 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. 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. 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. Many producers, traders, and users of nickel with short positions on the LME were facing margin calls many times larger than they were prepared for. 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. [ 2 ] it moved into the Indonesian nickel industry in 2009 calls close. Prices shot up as much as 250 % in fiscal 2020 and grew another 14.4 % year over in... By Next-Gen Operating Models for Bankers and Advisors, Macroprudential Policy and Estate... 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