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. Why is nickel going up so drastically in a short period of time? document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Copyright International Banker 2023 | All Rights Reserved Subscription | About us | LME brokers and their clients were hit with margin call after margin call. A short position is created when a trader sells a security he does not own, with the intention of repurchasing it later at a lower price. Comparable-store sales rose 19.3% in fiscal 2020 and grew another 14.4% year over year in the first nine months of 2021. Moscow's invasion of Ukraine and the west's moves to sanction Russia, a key major supplier, have electrified an already bullish nickel market. 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.. The Tsingshan Holdings Group ( Chinese: , ching-shan) is a Chinese private company active in the stainless steel and nickel industry. 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The fear was that Tsingshan could not make its margin calls, interim payments to parties on the other side of the trade. 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. 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. Short-covering trades made last week by the Chinese billionaire contributed to a swift, huge surge. For the fourth quarter, the company expects to generate "high single-digit. This is a fee deposit with a counterparty (often the brokers or exchange) to cover some of the credit risk undertaken to take a short position. 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. Among them were some of the biggest names on Wall Street. The price continued to climb higher as one of the world's largest nickel producers, Russia decided to invade Ukraine. 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. Keep in mind that past performance is no guarantee of future returns. Matthew Chamberlain speaks on "Bloomberg Markets: Europe.". Many traders expect the price to return to more normal levels once the margin call chaos has been resolved. At 1 a.m. on Tuesday, the market opened. our Subscriber Agreement and by copyright law. Why? Why bet against nickel when you have a nickel business? The most comprehensive solution to manage all your complex and ever-expanding tax and compliance needs. The giant commodity trader Glencore Plc also had a position on the LME that would benefit from rising prices. 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. Capital Com Online Investments Ltd is a limited liability company with company number 209236B. Others in the market may also push up prices in anticipation of that short covering. Tsingshan's nickel matte plans could be 1st step into lithium battery value chain. Tsingshan accounted for about half that amount. 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 . 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. ), by sales channel (Direct Channel, Distribution Channel), by player (Shandong Xinhai Technology, Tsingshan Holding Group, Eramet, Linyi Yichen Alloy, Jiangsu Delong Nickel Industry . our Subscriber Agreement and by copyright law. They held a hurried call on Monday evening, but decided to allow the nickel market to continue trading. People forgot that this isnt a video game retailer; its an important physical commodity.. For most of the past decade, theyd traded between US$10,000 and US$20,000. 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. The Initial Margin was $20,000 per contract. call +44 20 3097 8888 support@capital.com. Some hedge funds were buying nickel contracts in a bet on the electric vehicle boom. Contact us | As of the evening of March 13, the LME had yet to announce a date for nickel trading to resume. 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. 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. Your decision to trade should depend on your attitude to risk, expertise in the market, the spread of your portfolio and how comfortable you feel about losing money. https://www.wsj.com/articles/nickel-market-crisis-sends-london-metal-exchange-scrambling-to-prevent-damage-11646858558. Build the strongest argument relying on authoritative content, attorney-editor expertise, and industry defining technology. For the LME, the future isunclear. 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. Nevertheless, the short squeeze did trigger a whopping $8 billion margin call on Guangda. Distribution and use of this material are governed by During the standstill agreement, the company and banks will discuss a standby secured liquidity facility, Tsingshan said. Even at Mondays closing price of $US48,063, however, Tsingshans mark-to-market losses would number in the billions of dollars. 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. 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. As for the nickel market itself, prices remain elevated compared to before the short squeeze, possibly reflecting the persistence of Western sanctions on Russia. Tsingshan has been struggling to pay margin calls to its brokers, according to people familiar with the situation. ), by application (Stainless Steel Industry, Electronics Industry, etc. Matthew Chamberlain, the LMEs chief executive officer, had stayed up to watch. The Chinese government may also play a role. 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. 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. 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. .css-16c7pto-SnippetSignInLink{-webkit-text-decoration:underline;text-decoration:underline;cursor:pointer;}Sign In, Copyright 2023 Dow Jones & Company, Inc. All Rights Reserved, Final Early Bird Pricing! 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 . Indeed, reports suggest that a number of investors are now preparing lawsuits, while the LMEs regulator, the Financial Conduct Authority (FCA), is expected to investigate the incident. It decided to cancel all the trades that took place on Tuesday morningUS$3.9 billion of them, according to a Bloomberg calculation. The LMEs special committee held another call at about 6 a.m. Now they recognized that they had tosuspend trading. 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. This market frenzy all came to a head on March 8, when the LMEhaving allowed nickel prices to surge by around 250 percent in just a couple of days and reach an all-time high of $101,365/metric tonne (mt) in intra-day trading, which was more than double the $48,078/mt at which it closed the previous daysuspended all trading of nickel. read more. Not surprisingly, investors have not been particularly satisfied with the LMEs actionsor lack thereofin allowing this situation to transpire. Those 18 minutes will haunt me, says the executive, who wasnt authorized to speak publicly. But when the price rises instead of falls, the traders losses pile up, and given that prices can keep surging higher indefinitely, theres no limit to how substantial those losses can become. Tsingshan has been struggling to pay margin calls to its brokers, according to people familiar with the situation. Sanctions being implemented by Western powers against Russia over the invasion of its neighbour raised immediate concerns over the global supply of nickel, a metal that is primarily used around the world to make stainless steel and batteries and of which Russia accounts for around 10 percent of global supply. Margin call ini membuat harga nikel meledak dan menembus US$ 100 ribu per ton dari hanya US$ 25 ribu per ton. However, the short position holders have to pay a margin. Li Huan/Red Star News/VCG via Getty Images. . 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. It marked the first major market failure sinceRussias invasion of Ukrainejolted global markets, showing how the removal of one of the worlds largest exporters of resources from the financial system in the space of weeks is having ripple effects across the world. 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. 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. The most comprehensive solution to manage all your complex and ever-expanding tax and compliance needs. Follow the topics, people and companies that matter to you. In the meantime, the nickel market is on ice, with traders unable to exit their positions, and many billions of dollars tied up in margin calls. And never trade money that you cannot afford to lose. 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. Nickel prices shot up as much as 250% in two days on the LME at the start of this week. 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. 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. Tsingshan sold 200,000 ton March 2023 contracts at price of $20 per kilo. 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. Bloombergs Joe Deaux reports. Its unclear whether he will get his way. Capital Com is an execution-only service provider. 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) Xiang didnt believe the rally would last. Some think this could herald the end of the exchange itself. For the LME to cancel nickel trades between willing buyers and sellers is unforgiveable. Despite that, reserves that can be economically mined are limited. Some have also warned that much of the chaos in the nickel market may not be over yet. 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. . Continue reading your article witha WSJ subscription, Already a member? Traders must deposit cash, known as margin, with their brokers on a regular basis to cover potential losses on their positions. 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. Box N-4865, Nassau, Bahamas. Investors who had booked trades during the chaotic session in the early hours of Tuesdaywere furious. Nickel prices usually move a few hundred dollars per ton in a day. Investor enthusiasm for nickel is high amid expectations of strong demand growth for the metal in electric vehicles. It's been under growing pressure to meet the payments in recent days, the. The industry leader for online information for tax, accounting and finance professionals. . Opinion. 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. You should never trade more than you can afford to lose. 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. Browse an unrivalled portfolio of real-time and historical market data and insights from worldwide sources and experts. 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. Miners, traders, and manufacturers often use the market to make short betsthat is, to make money when prices fall. Neither party seems very keen on this idea, however. The seeds of the epic short squeeze were sown last year, when nickel, like all commodities, was rallying from its COVID-era low. While Russias nickel exports havent been targeted by sanctions, U.S. and European buyers have nonetheless sought alternatives to Russian sources. 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. But its extremely unusual for an exchange to cancel whole sessions of trading after the fact. People familiar with the discussions said the exchange would ideally prefer to wait until Xiang has reached a resolution with his banks and brokers. Mr Xiang told Chinese news outlet Yicai that Tsingshan did not have any problems with its nickel trading. Then on March 7, nickels price began its parabolic ascent, surging from US$30,000 a ton to more than US$50,000. If you are considering investing or trading nickel, its important to do your own research. Now they had to pay big margin calls on the exchange while receiving no margin from their client. Mr Xiang began building the short position in part because he wanted to hedge rising output, but also because he believed the rally in nickel prices would fade this year. (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 . Tsingshan is also NIC's majority shareholder with a 21.15% stake through Shanghai Decent Investment. Perdagangan nikel di LME dihentikan sementara sejak Selasa lalu. See here for a complete list of exchanges and delays. 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. The banks declined comment or did not respond to a request for comment. 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. The prices that were being seen during that Asian session were becoming disconnected from, I believe, physical reality.. Assessing the Incremental Costs of Regulation and Supervision Faced by EU Banks Compared to Their US Peers, Interview with Mr. lvaro Saboro, Chief Executive Officer, Grupo Financiero BCT. 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. LME brokers and their clients were hit with margin call after margin call. Now, the traders watched with a mixture of horror and grim fascination as the price went vertical. 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. Credit: INF News.com Massive short positions held by Xiang's Tsingshan Holding Group, the world's largest . He ranked 235th on the 2021 Hurun's China rich list, which puts his net worth closer to $4.2 . Exchanges. "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. 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. 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 . 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. Trading and mining giant Glencore was the dominant holder of nickel in recent months, according to people familiar with the matter. Creditors and banks who acted for Tsingshan were demanding margin settlements and the closing of all positions. 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. By April, nickel prices began to fall below $35,000/tonne and Tsingshan began to close its short positions and settled its margin calls. 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. A Glencore spokesman declined to comment. The arrangement will also help the pave the way for the London Metal Exchange to restart nickel trading, they said. Nickel is a non-ferrous metal, and the fifth most common element found on Earth. a practice known in financial markets as margin calls. Pada titik ini, posisi short Tsingshan dibekukan. (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 . Traders must deposit cash,. CCBI Global Markets is another creditor, two separate sources said. 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. The industry leader for online information for tax, accounting and finance professionals. 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. The trades that took place on Tuesday morningUS $ 3.9 billion of them, according to Bloomberg! A non-ferrous metal, and industry defining technology have a nickel business number 209236B keep in mind that past is. Would benefit from rising prices of real-time and historical market data and insights from sources! Thereofin allowing this situation to transpire Chamberlain speaks on `` Bloomberg Markets:.. Comprehensive solution to manage all your complex and ever-expanding tax and compliance needs, they said the... Selasa lalu Tuesday, the LMEs chief executive officer, had stayed up to watch nickel! 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