Nickel is commonly used in stainless steel production, but is also increasingly utilised in manufacturing batteries for electric vehicles (EVs). The majority of retail investor accounts lose money when trading CFDs. articles a month for anyone to read, even non-subscribers! The current events are unprecedented, LME said in a notice. 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. Now they had to pay big margin calls on the exchange while receiving no margin from their client. ), by application (Stainless Steel Industry, Electronics Industry, etc. 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. By now, Tsingshan wasnt the only nickel company that was strugglingjust the biggest. 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. Tsingshan is an excellent Chinese enterprise, and our positions and operations dont have any problems.. 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. Reuters, the news and media division of Thomson Reuters, is the worlds largest multimedia news provider, reaching billions of people worldwide every day. Exchanges sometimes cancel trades when technology glitches or fat fingers cause one-off mistakes. 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. 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. Nickel prices shot up as much as 250% in two days on the LME at the start of this week. Last chance for up to $40 off TurboTax, All Jeans + Pants 25% off! The LME announced on Friday it was raising margin requirements for nickel contracts by 12.5% to $2,250 a tonne. Distribution and use of this material are governed by 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. 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 question is, will it continue to fail? Ghali posited to CNN. See here for a complete list of exchanges and delays. During the standstill agreement, the company and banks will discuss a standby secured liquidity facility, Tsingshan said. This created an unprecedented LME nickel short squeeze. The extra charge kicks in at close of business on Tuesday. https://www.wsj.com/articles/nickel-market-crisis-sends-london-metal-exchange-scrambling-to-prevent-damage-11646858558. 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. 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. Following Tsingshan's statement announced March 15, the LME said that all nickel contracts will resume trading at 0800 London time on March 16. Bloomberg: Balance of Power focuses on the politics and policies being shaped by the agenda of President Biden's administration. 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 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. read more. He started increasing his short position on the London Metal Exchange. Contact us | 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. Screen for heightened risk individual and entities globally to help uncover hidden risks in business relationships and human networks. Nickel, used in stainless steel and electric-vehicle batteries, surged as much as 250% in two days to trade briefly above $100,000 a ton early Tuesday. 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 . Nickel prices on the LME jumped to record highs above $100,000 a tonne on March 8 as Tsingshan bought large amounts to reduce its short positions in the metal, which is used to make stainless steel and electric vehicle batteries. 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. 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. 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. 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. 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. Others in the market may also push up prices in anticipation of that short covering. The new historic high is nearly twice the previous record of $51,600 in 2007. The 145-year-old home of global metals trading has been heavily criticized by investors for its response to the crisis. HONG KONGChinese nickel titan Tsingshan Holding Group faces billions of dollars in trading losses, people familiar with the company said, after Russia's war in Ukraine set off an unprecedented. Several large brokers got margin calls of close to US$1 billion each over the course of the day. 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. As of the evening of March 13, the LME had yet to announce a date for nickel trading to resume. "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. Why? Nickel short interest was created by Tsingshan. Tsingshan and the LME declined to comment. 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. He draws a comparison with Silver Thursday, the day in 1980 when an attempt bythe Hunt brothersto corner the silver market came unstuck. 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. a practice known in financial markets as margin calls. Anyone using the LME needs to understand that. Nevertheless, the short squeeze did trigger a whopping $8 billion margin call on Guangda. 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. When it was flying towards US$100,000, you could feel the damage, and you knew companies were fighting for their existence, says John Browning, founding partner of brokerage Bands Financial Ltd. and a former LME board member. 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. Box N-4865, Nassau, Bahamas. The most comprehensive solution to manage all your complex and ever-expanding tax and compliance needs. 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. Those payments have now been made, a person familiar with the matter said on Tuesday. If nickel prices stay lofty it could complicate the energy transition with electric vehicle batteries costing more to produce. Zhejiang Huayou Cobalt plans to discuss an application to register the company's nickel for delivery on the exchange. Screen for heightened risk individual and entities globally to help uncover hidden risks in business relationships and human networks. 2023 Capital Com Online Investments Ltd. As for the nickel market itself, prices remain elevated compared to before the short squeeze, possibly reflecting the persistence of Western sanctions on Russia. (Podcast). 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. 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. Build the strongest argument relying on authoritative content, attorney-editor expertise, and industry defining technology. Brokers, in turn, must hold margin at the clearing house, LME Clear. Bloomberg News' Joe Deaux reports. 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 . The paper loss stood at $8 billion on Monday, before violent moves in nickel prices led the London Metal Exchange to suspend trading in the metal on Tuesday, one of the people said. 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. Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com. Exchanges. 3.1 What is the margin call to Tsingshan? Weda Bay is becoming a very material contributor to the cash flow of ERAMET and it's a fair view of what is the cash the Company can generate. Continue reading your article witha WSJ subscription, Already a member? Tsingshan has been finding it difficult to pay margin calls to its creditors, the report 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. Not everyone shared his pessimism about prices. In late February and early March, Tsingshan, which had sales of 352 billion yuan (US$56 billion) last year, paid its margin calls on time. It granted extra time on March 7th to CCBI Global, a Chinese broker for Tsingshan that is a member of the LME, to raise funds from its state-owned parent, China Construction Bank, to cover. We expect the LME nickel price to remain volatile in the near term, as the global nickel market finds equilibrium following recent events, S&Ps Sappor added, warning that an elevated risk of another short squeeze hitting the LME nickel market in the near term continued, given the presence of both a dominant warrant-holding position on available LME stocks and Tsingshans short position. Four or five of the brokerages that are LME members would have failed, a shock that could have devastated the global metals industry. Pleased to report an extremely strong year for the Nickel Industries and the. Margin call ini membuat harga nikel meledak dan menembus US$ 100 ribu per ton dari hanya US$ 25 ribu per ton. The super spike was driven by holders of short positions, including Tsingshan and its brokers, rushing to close them out. Then on March 7, nickels price began its parabolic ascent, surging from US$30,000 a ton to more than US$50,000. It decided to cancel all the trades that took place on Tuesday morningUS$3.9 billion of them, according to a Bloomberg calculation. The Morowali park mainly produces nickel pig iron for stainless steel. Things seemed calm at first: Prices were hovering around US$50,000 a ton, and he went to bed. But nothing could prepare the market for what was about to follow, with the Russia-Ukraine conflict sending prices skywards on global supply concerns. 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. 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. 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 Holdings has secured loan packages from various lenders, according to a Bloomberg report citing unnamed sources, following a record short squeeze that saw nickel prices more than double in hours earlier this week. our Subscriber Agreement and by copyright law. Sanctions imposed on Russia ignited market concern that Russia-origin nickel may be banned in Europe, which could cause a global supply deficit. 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. 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. But since last year, Tsingshan has also started to produce a source of nickel for batteries. Only you can decide whether nickel is a good buy or not. Nickel is a non-ferrous metal, and the fifth most common element found on Earth. Most market participants expect nickel prices to come back down once the crisis around Xiangs position has been resolved. The company paid at least some of its margin calls early on Monday, according to a person familiar with the matter. [2] It moved into the Indonesian nickel industry in 2009. At $2,250 a tonne, the capital required on 300,000 tonnes of nickel would be $675 million, according to Reuters calculations. read more. NIC's operations and cash flow remained stable in 2022 despite Tsingshan's significant loss on its nickel short position in March 2022. Jack Farchy, Alfred Cang and Mark Burton, Bloomberg News. Bloomberg: Balance of Power focuses on the politics and policiesbeing shaped by the agenda of President Biden's administration. LME brokers and their clients were hit with margin call after margin call. This copy is for your personal, non-commercial use only. 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. The nickel market was anything but calm. "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. .css-16c7pto-SnippetSignInLink{-webkit-text-decoration:underline;text-decoration:underline;cursor:pointer;}Sign In, Copyright 2023 Dow Jones & Company, Inc. All Rights Reserved, 50% off + free delivery on any order with DoorDash promo code, Wayfair promo code: 10% off any single purchase, 60% off running shoes and apparel at Nike without a promo code, March Flash Sale: Extra 30% Off w/ Groupon Promo Code. 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 broker was able to settle the margin calls on Tuesday after several clients, including Tsingshan, got loans to cover their positions, one of the people said. Mr Xiang told Chinese news outlet Yicai that Tsingshan did not have any problems with its nickel trading. The industry leader for online information for tax, accounting and finance professionals. 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. Tsingshan debacle exposes weak underbelly of LME. The material provided on this website is for information purposes only and should not be understood as an investment advice. Reuters provides business, financial, national and international news to professionals via desktop terminals, the world's media organizations, industry events and directly to consumers. Executives from Goldman Sachs Group Inc. voiced their displeasure at the decision on a call with Chamberlain. Are you considering whether or not to trade nickel or want to learn more about the market? 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. And once again, this short squeeze racked up billions in losses for those involved. History of Financial Crises, AUTHORITATIVE ANALYSIS ON INTERNATIONAL BANKING, This site is protected by reCAPTCHA and the Google, Sign up to the International Banker newsletter, 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, 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. He was awakened by a phone call at 5:30 a.m. 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. 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. By April, nickel prices began to fall below $35,000/tonne and Tsingshan began to close its short positions and settled its margin calls. However, for business days 7th and 8th March, they would remain at . 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. 8Th March, they would remain at it got to a bloomberg calculation for,. When an attempt bythe Hunt brothersto corner the Silver market came unstuck would be $ 675 million, to! 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