If nickel prices stay lofty it could complicate the energy transition with electric vehicle batteries costing more to produce. Most market participants expect nickel prices to come back down once the crisis around Xiangs position has been resolved. And never trade money that you cannot afford to lose. Then on March 7, nickels price began its parabolic ascent, surging from US$30,000 a ton to more than US$50,000. 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. 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. Xiang wanted to increase Tsingshans production dramatically by producing so-callednickel matte. First it allowed the market to reopen even after a 66% price surge on March 7. Some aggrieved traders are already preparing to take legal action against the exchange. 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. It also doesn't create waste and may help fight the climate crisis. Moscow's invasion of Ukraine and the west's moves to sanction Russia, a key major supplier, have electrified an already bullish nickel market. read more. The industry leader for online information for tax, accounting and finance professionals. 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 tycoon whose big short bet on nickel helped trigger one of the most dramatic price spikes in history has told his banks and brokers that he doesnt intend to reduce his position, according to people familiar with the matter. But since last year, Tsingshan has also started to produce a source of nickel for batteries. (HNI) to produce higher-grade nickel matte. The Chinese nickel tycoon whose big short position caused chaos reached a deal with his banks to avoid further margin calls, marking a key step toward restoring stability to the market after an unprecedented squeeze. articles a month for anyone to read, even non-subscribers! Keep in mind that past performance is no guarantee of future returns. 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. Bloomberg News' Joe Deaux reports. Copyright | Following Russias invasion of Ukraine on 24 February, the three-month nickel contract rocketed to more than $100,000/tonne on 8 March, hitting an intra-day high at $101,365 on the same day. Bloomberg: Balance of Power focuses on the politics and policiesbeing shaped by the agenda of President Biden's administration. Traders must deposit cash, known as margin, with their brokers on a regular basis to cover potential losses on their positions. 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. Solugen Bio has built a chemical plant that produces all manner of chemical-based products using bio-based feedstock instead of fossil fuels. 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. Tsingshan's difficulties paying its margin calls have put its . Some hedge funds were buying nickel contracts in a bet on the electric vehicle boom. 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. 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. Subsequent reports suggested that only one-fifth of Tsingshans total nickel exposure was visible to the exchange; the rest was held in private over-the-counter trades with banks including JPMorgan Chase, BNP Paribas, Standard Chartered and United Overseas Bank Ltd. As such, Guangda was aiming for his massive short position to dominate the market and send the LME nickel price down. read more. (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 . Join the 500.000+ traders worldwide that chose to trade with Capital.com, Also you can contact us: Late Tuesday, the exchange said it anticipates trading wont resume before Friday. The fallout was immediate. Nickel prices usually move a few hundred dollars per ton in a day. The LME suspended trading in nickel on Tuesday morning after one of the most dramatic price spikes in commodity market history. 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. Tsingshan, a privately-held company, and other 'shorts' faced larger margin calls on their short bets after the LME raised the amount of money companies had to deposit with it to cover their exposure to falling nickel prices, the three sources said. Is the US Finally Warming to the Possibility of Creating a CBDC? Continue reading your article witha WSJ subscription, Already a member? The LME did not put it into default, instead giving it more time to pay. 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The LMEs special committee held another call at about 6 a.m. Now they recognized that they had tosuspend trading. And once again, this short squeeze racked up billions in losses for those involved. In recent days, Tsingshan has been under growing pressure from its brokers to meet margin calls on that position - a market dynamic which has helped to drive prices ever higher. 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. Others in the market may also push up prices in anticipation of that short covering. Indeed, Russia is the worlds third-biggest nickel producer after Indonesia and the Philippines. He started increasing his short position on the London Metal Exchange. 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. ), by application (Stainless Steel Industry, Electronics Industry, etc. By now, the entire nickel industry was in crisis. 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. Effectively, it rewound the market to the moment when prices closed on Monday at US$48,078. 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. https://www.wsj.com/articles/nickel-market-crisis-sends-london-metal-exchange-scrambling-to-prevent-damage-11646858558. Tsingshan has said it has secured facilities with its consortium banks and will exit its position in an orderly manner. The seeds of the epic short squeeze were sown last year, when nickel, like all commodities, was rallying from its COVID-era low. The LME made a near-unprecedented decision. 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. 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. Our Standards: The Thomson Reuters Trust Principles. 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. Exchanges. 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. Browse an unrivalled portfolio of real-time and historical market data and insights from worldwide sources and experts. As the price rose through the London day after offices in Asia had closed, Tsingshan started struggling to pay, the people say. Tsingshan debacle exposes weak underbelly of LME. Traders must deposit cash,. 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.. Xiangs short position has now racked upbillions of dollars in losses. Founded back in 1877 and now owned by Hong Kong Exchanges & Clearing (HKEX), the LME performs a critical role in determining benchmark prices for the global metals industry and provides a liquid market venue for financial institutions to make money. It did not provide any other details, such as how long the standstill period would last. 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. Bloomberg: Balance of Power focuses on the politics and policiesbeing shaped by the agenda of President Biden's administration. Chinese entrepreneur Xiang Guangda has been caught out by nickel's price surge. Perdagangan nikel di LME dihentikan sementara sejak Selasa lalu. Last chance for up to $40 off TurboTax, All Jeans + Pants 25% off! Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com. 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. . 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's 2022 nickel equivalent output is . 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. The LME at the end of the day is a physical metal market, he says. Short-covering trades made last week by the Chinese billionaire contributed to a swift, huge surge. 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. If you are considering investing or trading nickel, its important to do your own research. At the current price of nickel, the brokers themselves wouldnt be able to pay their margin calls, they told the LME. The current events are unprecedented, LME said in a notice. 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. Access unmatched financial data, news and content in a highly-customised workflow experience on desktop, web and mobile. Contact us | Matthew Chamberlain speaks on "Bloomberg Markets: Europe.". 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. 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. Kader Commercial International Bank (CIB), Davi Ferreira Veronese University of So Paulo, Maria Paula Bertran University of So Paulo, Thanos Andrikopoulos University of Hull, Tim Johnson JB Super Yachts | TJB Private Travel. Tsingshan was unable meet margin calls and only avoided bankruptcy after . Xiang didnt believe the rally would last. 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. Are you considering whether or not to trade nickel or want to learn more about the market? You should do your own research, looking at the latest news, technical analysis, and analyst commentary before trading. The price spike left Tsingshan exposed to $8 billion USD of trading losses whilst struggling to meet their margin calls. The most comprehensive solution to manage all your complex and ever-expanding tax and compliance needs. 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