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 LME suspended nickel trading in the early trading session on March 8 after prices more than doubled, breaching $100,000/mt mark and briefly reaching a record high of $101,365/mt. Not everyone shared his pessimism about prices. It was a classic short squeeze, as the pain for Tsingshan, its brokers, and other shorts created a self-reinforcing cycle. 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. Soon Chamberlain and other executives at the exchange began receiving frantic phone calls from LME brokers. 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 most comprehensive solution to manage all your complex and ever-expanding tax and compliance needs. Tsingshan has been struggling to pay margin calls to its brokers, according to people familiar with the situation. Follow the topics, people and companies that matter to you. The Companys registered office is at Bahamas Financial Centre, 3rd Floor, Shirley and Charlotte Street, P.O. Some have also warned that much of the chaos in the nickel market may not be over yet. 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. Its nickel matte production in Indonesia is nearly 8,000 tonnes per month, according to the Shanghai Securities News. ), by application (Stainless Steel Industry, Electronics Industry, etc. The Initial Margin was $20,000 per contract. Reuters could not determine how large Tsingshan's short position currently is after it cut its exposure. By April, nickel prices began to fall below $35,000/tonne and Tsingshan began to close its short positions and settled its margin calls. Perdagangan nikel di LME dihentikan sementara sejak Selasa lalu. Browse an unrivalled portfolio of real-time and historical market data and insights from worldwide sources and experts. Beijing is supportive of him, Xiang told contacts recently. LME brokers and their clients were hit with margin call after margin call. 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 giant commodity trader Glencore Plc also had a position on the LME that would benefit from rising prices. During the standstill agreement, the company and banks will discuss a standby secured liquidity facility, Tsingshan said. 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. As of the evening of March 13, the LME had yet to announce a date for nickel trading to resume. By now, Tsingshan wasnt the only nickel company that was strugglingjust the biggest. Nickel short interest was created by Tsingshan. 3.1 What is the margin call to Tsingshan? Chinese entrepreneur Xiang Guangda has been caught out by nickel's price surge. As the price rose through the London day after offices in Asia had closed, Tsingshan started struggling to pay, the people say. 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. 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. 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. Late Tuesday, the exchange said it anticipates trading wont resume before Friday. The frenzied move the largest-ever on the LME came as investors and industrial users who had sold the metal scrambled to buy the contracts back after prices initially rallied on concerns . At $2,250 a tonne, the capital required on 300,000 tonnes of nickel would be $675 million, according to Reuters calculations. Li Huan/Red Star News/VCG via Getty Images. A week earlier, nickel was trading around $25,000 and the price of the metal has more than quadrupled in a matter of days. 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. 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. 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. 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. Join the 500.000+ traders worldwide that chose to trade with Capital.com, Also you can contact us: If you are considering investing or trading nickel, its important to do your own research. 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. Bloomberg: Balance of Power focuses on the politics and policies being shaped by the agenda of President Biden's administration. For Xiangs big short position, that was painful. If nickel prices stay lofty it could complicate the energy transition with electric vehicle batteries costing more to produce. 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. Copyright | The current events are unprecedented, LME said in a notice. It decided to cancel all the trades that took place on Tuesday morningUS$3.9 billion of them, according to a Bloomberg calculation. But nothing could prepare the market for what was about to follow, with the Russia-Ukraine conflict sending prices skywards on global supply concerns. ), by sales channel (Direct Channel, Distribution Channel), by player (Shandong Xinhai Technology, Tsingshan Holding Group, Eramet, Linyi Yichen Alloy, Jiangsu Delong Nickel Industry . JPMorgan Chase & Co (JPM.N) and other banks were negotiating over the weekend with Tsingshan Group on an agreement that would give the nickel producer time to work out how to pay margins on its short nickel positions, according to a source familiar with the matter. 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. 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. Given nickel matte prices of roughly $15,421/t May 18, we calculate a profit margin of $5,571/t for Tsingshan's nickel in matte. The simple fact here is that we did not have visibility over the size of the risk, Matthew Chamberlain, the LMEs chief executive, also stated. read more. Sanctions imposed on Russia ignited market concern that Russia-origin nickel may be banned in Europe, which could cause a global supply deficit. Opinion. Bloomberg: Balance of Power focuses on the politics and policiesbeing shaped by the agenda of President Biden's administration. 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. Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com. 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(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 . 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. Nickel prices trading on the London Metal Exchange (LME) has fallen significantly over the past few months as restrictions cooled the turbulent market, pulling the metal down from its record high of above $100,000 a tonne on 8 March. Prices exploded, thanks mainly to one companyindeed, one man. The sharp increase in nickel prices was driven by supply concern exacerbated by Russias invsion of Ukraine Russia is the third largest primary nickel producer after Indonesia and China. It's been under growing pressure to meet the payments in recent days, the. 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. China's Tsingshan Holding Group has reached agreements with two companies to swap its . The difference is that nickel is a commodity that touches the entire global economy. 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. 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. Tsingshan Holding Group held the biggest short position for nickel on the LME. The short squeeze gathered momentum as Chinas Tsingshan Holding Group Co. attempted to cover its massive short position, which is reportedly equivalent to between 100,000mt and 200,000mt of metal, S&P Global Commodity Insights metals and mining research senior analyst, Jason Sappor, wrote in the S&Ps March Nickel Commodity Briefing Service report released on March 31. 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. https://www.wsj.com/articles/chinese-nickel-giant-tsingshan-faces-8-billion-trading-loss-as-ukraine-war-upends-market-11646765353. 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. The seeds of the epic short squeeze were sown last year, when nickel, like all commodities, was rallying from its COVID-era low. The move is a characteristic display of self-confidence from Xiang Guangda, the owner of Tsingshan Holding Group Co., and means that the nickel market could be set for more fireworks once it reopens. 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 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. This is lower than Nickel Mines' expected profit margin for nickel in matte at current prices. Nickel prices usually move a few hundred dollars per ton in a day. Several large brokers got margin calls of close to US$1 billion each over the course of the day. To limit price volatility the LME imposed daily upper and lower price limits of 15% for all its physically delivered metals. https://www.wsj.com/articles/nickel-market-crisis-sends-london-metal-exchange-scrambling-to-prevent-damage-11646858558. Nickel short interest was created by Tsingshan. Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com. Exchanges sometimes cancel trades when technology glitches or fat fingers cause one-off mistakes. 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. All quotes delayed a minimum of 15 minutes. Everything changed when Russia invaded Ukraine. Read on for our analysis on the recent LME nickel short squeeze and the market outlook. FY18 RESULTS, FY19 GUIDANCE AND CORPORATE PRESENTATION 22 AUGUST 2018 AGENDA Results Guidance Corporate Operations Growth Exploration Nickel Market DISCLAIMER AND FORWARD Tsingshan thus desperately scrambled to buy nickel to cover its short position, which only added further upward pressure on prices. He was awakened by a phone call at 5:30 a.m. 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. However, for business days 7th and 8th March, they would remain at . WATCH: Trading on LME is now set to resume Wednesday. For the LME, the future isunclear. (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 . 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 . Tsingshan accounted for about half that amount. 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. Xiang shrugged off suggestions to reduce short positions, Tsingshans nickel short position stood at about 150,000 tons. They held a hurried call on Monday evening, but decided to allow the nickel market to continue trading. Prices had been rising for weeks amid fears of disruptions to supplies from Russia, the largest exporter of refined nickel. . The question is, will it continue to fail? Ghali posited to CNN. Bloomberg News' Joe Deaux reports. See here for a complete list of exchanges and delays. Still, contracts on the LME are backed by physical metal in a network of warehouses around the world, providing a direct link with the real-world metals industry. Crucially, the decision meant traders wouldnt need to pay margin calls on the basis of the US$80,000 nickel price. 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. LME brokers and their clients were hit with margin call after margin call. The extra charge kicks in at close of business on Tuesday. Miners, traders, and manufacturers often use the market to make short betsthat is, to make money when prices fall. 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. Bloombergs Joe Deaux reports. Now, people familiar with the matter say, the exchange is likely to introduce such measures as position limits and greater transparency. Tsingshan and others had to buy . Brokers, in turn, must hold margin at the clearing house, LME Clear. 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. 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. The exchange had serious concerns about the ability of market participants to meet their resulting margin calls, raising the significant risk of multiple defaults. Despite that, Chamberlaininsisted to Bloomberg TVon March 9 that the solvency of the LME itself was never in doubt. Browse an unrivalled portfolio of real-time and historical market data and insights from worldwide sources and experts. That might have taken down some of the LME 's member-brokers. Tsingshan is also NIC's majority shareholder with a 21.15% stake through Shanghai Decent Investment. The price move on March 8 created a systemic risk to the market, the LME said two days later. Tsingshan's 2022 nickel equivalent output is . Tsingshan's difficulties paying its margin calls have put its . Forbes places Xiang's real-time net worth at $1.2 billion. 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. Capital Com Online Investments Ltd is a limited liability company with company number 209236B. call +44 20 3097 8888 support@capital.com. And when those wagers move violently in the opposite direction, they can be hit with huge margin calls, or requests to put down more cash to back their trades. This report studies the Ferronickel market, covering market size for segment by type (Ferronickel (Nickel15%), Ferronickel (Nickel15-25%), etc. 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. Screen for heightened risk individual and entities globally to help uncover hidden risks in business relationships and human networks. articles a month for anyone to read, even non-subscribers! Reuters provides business, financial, national and international news to professionals via desktop terminals, the world's media organizations, industry events and directly to consumers. 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. read more. The major market events for the week ahead right in your inbox. Why is nickel going up so drastically in a short period of time? The new historic high is nearly twice the previous record of $51,600 in 2007. The war in Ukraine surprised the market and led to a price surge, pushing Tsingshan's margin to billions as it rose in-line with nickel prices. Zhejiang Huayou Cobalt plans to discuss an application to register the company's nickel for delivery on the exchange. Tsingshans were even larger, numbering roughly US$3 billion, according to a Bloomberg calculation based on the companys total short positionwhich, even after Xiang had closed out a portion of the bet in previous weeks, was over 150,000 tons. While the exact scale of Mr Xiangs losses is unclear, Tsingshans short position on the London Metal Exchange is in the region of 100,000 tonnes of nickel, people familiar with the matter said. Tsingshan has been finding it difficult to pay margin calls to its creditors, the report 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. 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. Those 18 minutes will haunt me, says the executive, who wasnt authorized to speak publicly. 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All Rights Reserved, Final Early Bird Pricing! Help using this website - Accessibility statement. Yet the day before, the market had started to unravel, with prices rising by astunning66 per cent to US$48,078. A sharp surge in nickel prices triggered margin call fears at the London Metal Exchange which suspended trading after prices doubled in hours. 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. According to reports, Tsingshan Group plans to produce 850,000 tons of nickel in 2022, an increase of 40% compared with the production of nearly 600,000 tons in 2021. Are you considering whether or not to trade nickel or want to learn more about the market? 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. Tsingshan and the LME declined to comment. articles a month for anyone to read, even non-subscribers! The majority of retail investor accounts lose money when trading CFDs. Distribution and use of this material are governed by 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.. This copy is for your personal, non-commercial use only. The nickel market was anything but calm. 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