(Podcast). Beijing is supportive of him, Xiang told contacts recently. We expect the EBITDA margin to be around . But the effects of the short squeeze are likely to be felt in other ways. Contact us | Now, people familiar with the matter say, the exchange is likely to introduce such measures as position limits and greater transparency. Continue reading your article witha WSJ subscription, Already a member? Some think this could herald the end of the exchange itself. 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. The metal is found in all our homes as a key ingredient of stainless steel. For Xiangs big short position, that was painful. 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. ), by application (Stainless Steel Industry, Electronics Industry, etc. articles a month for anyone to read, even non-subscribers! Tsingshan's 2022 nickel equivalent output is . The nickel market was anything but calm. 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. The difference is that nickel is a commodity that touches the entire global economy. See here for a complete list of exchanges and delays. Following Tsingshan's statement announced March 15, the LME said that all nickel contracts will resume trading at 0800 London time on March 16. By April, nickel prices began to fall below $35,000/tonne and Tsingshan began to close its short positions and settled its margin calls. UNFORGIVEABLE,tweetedMark Thompson, a former trader at Trafigura and Apollo. All quotes delayed a minimum of 15 minutes. Miners, traders, and manufacturers often use the market to make short betsthat is, to make money when prices fall. One thing is sure: If Xiang can weather the storm, Tsingshans nickel producing assets stand to benefit from the higher prices, offsetting losses from the short. . Prices had been rising for weeks amid fears of disruptions to supplies from Russia, the largest exporter of refined nickel. 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. Access unmatched financial data, news and content in a highly-customised workflow experience on desktop, web and mobile. Reuters, the news and media division of Thomson Reuters, is the worlds largest multimedia news provider, reaching billions of people worldwide every day. 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. 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. Matthew Chamberlain speaks on "Bloomberg Markets: Europe.". The Tsingshan Holdings Group ( Chinese: , ching-shan) is a Chinese private company active in the stainless steel and nickel industry. Terms & Conditions Finance Publishing But nothing could prepare the market for what was about to follow, with the Russia-Ukraine conflict sending prices skywards on global supply concerns. There are also traders making plans to abandon the LME nickel contract, a move that would reduce market liquidity, making it harder for everyone from miners to car companies to manage their exposure to prices and access financing. Its also one of the most important raw materials needed inmaking batteriesfor electric vehicles. It should be mentioned that nickel had already rallied to $25,000 in January before easing off by the end of the month. Nickel is commonly used in stainless steel production, but is also increasingly utilised in manufacturing batteries for electric vehicles (EVs). Now, the traders watched with a mixture of horror and grim fascination as the price went vertical. Last chance for up to $40 off TurboTax, All Jeans + Pants 25% off! It had sold nickel forward on the markets, betting on the price going down, not up. Its been under growing pressure to meet the payments in recent days, the people said. Help using this website - Accessibility statement. Tsingshan was unable meet margin calls and only avoided bankruptcy after . 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. 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. Only you can decide whether nickel is a good buy or not. Privacy Policy | Xiang shrugged off suggestions to reduce short positions, Tsingshans nickel short position stood at about 150,000 tons. 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 16th, then 8 percent the following day, 12 percent on March 18 and 15 percent from March 21) prevented futures prices from falling sufficiently to levels that would entice buyers to enter the market once more. 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. Is the US Finally Warming to the Possibility of Creating a CBDC? Weve received a lot of phone calls today, he said. 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. 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. This is lower than Nickel Mines' expected profit margin for nickel in matte at current prices. Bloomberg News' Joe Deaux reports. If nickel prices stay lofty it could complicate the energy transition with electric vehicle batteries costing more to produce. Several large brokers got margin calls of close to US$1 billion each over the course of the day. Bloomberg: Balance of Power focuses on the politics and policies being shaped by the agenda of President Biden's administration. 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. Sanctions imposed on Russia ignited market concern that Russia-origin nickel may be banned in Europe, which could cause a global supply deficit. Among them were some of the biggest names on Wall Street. Matthew Chamberlain, the LMEs chief executive officer, had stayed up to watch. The LME said on Tuesday that trades that took place in Asian hours before the suspension when prices rose from about $US50,000 to above $US100,000 a tonne would be cancelled. 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. 3.1 What is the margin call to Tsingshan? The LME convened its special committee, a small group of metals and legal experts with the power to issue emergency rules for the market. Then on March 7, nickel's price began its parabolic. 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 . 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. 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. (HNI) to produce higher-grade nickel matte. 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 material provided on this website is for information purposes only and should not be understood as an investment advice. It could be even larger than that when positions taken through intermediaries are taken into account, people separately said. The super spike was driven by holders of short positions, including Tsingshan and its brokers, rushing to close them out. 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. 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. It was a classic short squeeze, as the pain for Tsingshan, its brokers, and other shorts created a self-reinforcing cycle. Short-covering trades made last week by the Chinese billionaire contributed to a swift, huge surge. If you rely on the information on this page then you do so entirely on your own risk. 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. That put Tsingshans banks and brokers, which include JPMorgan Chase, BNP Paribas, and Standard Chartered,in a bind. 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. Capital Com is an execution-only service provider. 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. Tsingshan, among other Chinese companies, is ramping up a wave of new battery-grade nickel capacity in Indonesia. 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. Tsingshan has been finding it difficult to pay margin calls to its creditors, the report said. 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. LONDON (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 . Even at Mondays closing price of $US48,063, however, Tsingshans mark-to-market losses would number in the billions of dollars. He started increasing his short position on the London Metal Exchange. Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com. The LME did not put it into default, instead giving it more time to pay. Nickel short interest was created by Tsingshan. Tsingshan is an excellent Chinese enterprise, and our positions and operations dont have any problems.. 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. Chinese entrepreneur Xiang Guangda has been caught out by nickel's price surge. Read on for our analysis on the recent LME nickel short squeeze and the market outlook. This copy is for your personal, non-commercial use only. 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. Comparable-store sales rose 19.3% in fiscal 2020 and grew another 14.4% year over year in the first nine months of 2021. 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. The extra charge kicks in at close of business on Tuesday. 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. Nickel prices have since fallen and the three-month nickel last settled at $23,371/tonne on 3 November. Reuters, the news and media division of Thomson Reuters, is the worlds largest multimedia news provider, reaching billions of people worldwide every day. But since last year, Tsingshan has also started to produce a source of nickel for batteries. Indeed, Russia is the worlds third-biggest nickel producer after Indonesia and the Philippines. 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