Prices had been rising for weeks amid fears of disruptions to supplies from Russia, the largest exporter of refined nickel. Now they had to pay big margin calls on the exchange while receiving no margin from their client. FY18 RESULTS, FY19 GUIDANCE AND CORPORATE PRESENTATION 22 AUGUST 2018 AGENDA Results Guidance Corporate Operations Growth Exploration Nickel Market DISCLAIMER AND FORWARD The industry leader for online information for tax, accounting and finance professionals. One of Tsingshans brokers, CCBI Global Markets, also failed to pay hundreds of millions of dollars in margin calls on its nickel positions on March 7. Join the 500.000+ traders worldwide that chose to trade with Capital.com, Also you can contact us: The big fear was that Tsingshan would struggle to make margin calls with its bankers, potentially facing billions of dollars in losses. The Morowali park mainly produces nickel pig iron for stainless steel. 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. Nickel short interest was created by Tsingshan. 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. https://www.wsj.com/articles/chinese-nickel-giant-tsingshan-faces-8-billion-trading-loss-as-ukraine-war-upends-market-11646765353. 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. 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. The tightness in the market had been exacerbated by the presence of an unidentified trader who, according to exchange data, controlled somewhere between 50 per cent and 80 per cent of nickel warehouse warrants monitored by the LME as of last month. Privacy Policy | See here for a complete list of exchanges and delays. 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. 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. 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. 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. Build the strongest argument relying on authoritative content, attorney-editor expertise, and industry defining technology. A Glencore spokesman declined to comment. Q. Capital Com is an execution-only service provider. Tsingshan is also NIC's majority shareholder with a 21.15% stake through Shanghai Decent Investment. Those 18 minutes will haunt me, says the executive, who wasnt authorized to speak publicly. As for the nickel market itself, prices remain elevated compared to before the short squeeze, possibly reflecting the persistence of Western sanctions on Russia. 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. You should do your own research, looking at the latest news, technical analysis, and analyst commentary before trading. 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. Distribution and use of this material are governed by They held a hurried call on Monday evening, but decided to allow the nickel market to continue trading. The fear was that Tsingshan could not make its margin calls, interim payments to parties on the other side of the trade. Already at an all-time high by 5:42 a.m., it lurched higher in stomach-churning leaps, soaring US$30,000 in a matter of minutes. For non-personal use or to order multiple copies, please contact Most market participants expect nickel prices to come back down once the crisis around Xiangs position has been resolved. ), by application (Stainless Steel Industry, Electronics Industry, etc. This is lower than Nickel Mines' expected profit margin for nickel in matte at current prices. Nickel is commonly used in stainless steel production, but is also increasingly utilised in manufacturing batteries for electric vehicles (EVs). 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. See here for a complete list of exchanges and delays. This copy is for your personal, non-commercial use only. 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. This report studies the Ferronickel market, covering market size for segment by type (Ferronickel (Nickel15%), Ferronickel (Nickel15-25%), etc. 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. Yet the day before, the market had started to unravel, with prices rising by astunning66 per cent to US$48,078. Matthew Chamberlain speaks on "Bloomberg Markets: Europe.". 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. Tsingshan has said it has secured facilities with its consortium banks and will exit its position in an orderly manner. For Xiangs big short position, that was painful. Last chance for up to $40 off TurboTax, All Jeans + Pants 25% off! Why? 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 contribution of a dab has been 44 million to . 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. Tsingshan agreed standstill with JPMorgan-led group of banks, Talks continue on loan facility to backstop short position. call +44 20 3097 8888 support@capital.com. Weve received a lot of phone calls today, he said. 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. While Russias nickel exports havent been targeted by sanctions, U.S. and European buyers have nonetheless sought alternatives to Russian sources. 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. Those past scandals forced reforms on the exchange. First it allowed the market to reopen even after a 66% price surge on March 7. 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. A sharp surge in nickel prices triggered margin call fears at the London Metal Exchange which suspended trading after prices doubled in hours. 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. Despite that, reserves that can be economically mined are limited. Its also one of the most important raw materials needed inmaking batteriesfor electric vehicles. 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 creditors involved include both local and intentional banks, including J.P. Morgan and China Construction Bank . 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. Bloomberg: Balance of Power focuses on the politics and policiesbeing shaped by the agenda of President Biden's administration. Reuters, the news and media division of Thomson Reuters, is the worlds largest multimedia news provider, reaching billions of people worldwide every day. Tsingshan is an excellent Chinese enterprise, and our positions and operations dont have any problems.. Four or five of the brokerages that are LME members would have failed, a shock that could have devastated the global metals industry. But its obligations dwarfed its available cash and bank credit. It was a classic short squeeze, as the pain for Tsingshan, its brokers, and other shorts created a self-reinforcing cycle. 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. 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. 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. We expect the EBITDA margin to be around . Nickels 250 per cent price spike in little more than 24 hours plunged the industry into chaos, triggering billions of dollars in losses for traders who bet the wrong way and leading the London Metal Exchange to suspend trading for the first time in three decades. 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. 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. However, the short position holders have to pay a margin. The limits also meant that those buyers seeking to unwind their positions had to join a long queue of sellers waiting to complete their transactions. Follow the topics, people and companies that matter to you. Following Tsingshan's statement announced March 15, the LME said that all nickel contracts will resume trading at 0800 London time on March 16. The metal is found in all our homes as a key ingredient of stainless steel. LME CEO Matthew Chamberlain says suspending nickel trading and canceling the trades on the London Metal Exchange was the right decision for the sake of market stability. 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. 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. Tsingshan has been finding it difficult to pay margin calls to its creditors, the report said. We do not make any representations or warranty on the accuracy or completeness of the information that is provided on this page. Access unmatched financial data, news and content in a highly-customised workflow experience on desktop, web and mobile. Others in the market may also push up prices in anticipation of that short covering. Credit: INF News.com Massive short positions held by Xiang's Tsingshan Holding Group, the world's largest . That means it would have suffered much more than $US2 billion ($2.7 billion) of daily losses at the most extreme point of nickels surge. 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. If you rely on the information on this page then you do so entirely on your own risk. The LME was forced to suspend nickel trading for the first time since 1988 on March 8 and is trying to facilitate negotiations to net off long and short positions in order to reopen the market. People forgot that this isnt a video game retailer; its an important physical commodity.. Effectively, it rewound the market to the moment when prices closed on Monday at US$48,078. President Tayyip Erdogan indicated on Wednesday that elections will be held on May 14, sticking to his previous plan for the vote with a date just over three months after a devastating earthquake killed more than 45,000 people in Turkey. Comparable-store sales rose 19.3% in fiscal 2020 and grew another 14.4% year over year in the first nine months of 2021. Build the strongest argument relying on authoritative content, attorney-editor expertise, and industry defining technology. And thank you everyone for your attendance on today's call for the Nickel Industries Full Year 2022 Results. Creditors and banks who acted for Tsingshan were demanding margin settlements and the closing of all positions. During the standstill agreement, the company and banks will discuss a standby secured liquidity facility, Tsingshan said. Our Standards: The Thomson Reuters Trust Principles. Tsingshan and others had to buy . For participants in commodities exchanges, a price rally is not necessarily good news. 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. The Chinese government may also play a role. The most comprehensive solution to manage all your complex and ever-expanding tax and compliance needs. 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. Is the Strength of Big Tech Regulation Sufficient at Present? The extra charge kicks in at close of business on Tuesday. 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. 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.. Prices of oil, gas, wheat and a range of metals, including aluminium and palladium, have soared since the invasion, ramping up costs for companies and consumers and threatening the nascent recovery from the coronavirus pandemic. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Jack Farchy, Alfred Cang and Mark Burton, Bloomberg News. The industry leader for online information for tax, accounting and finance professionals. 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. 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. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents. 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. Trimegah menilai bisa. The current events are unprecedented, LME said in a notice. 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.. Late Tuesday, the exchange said it anticipates trading wont resume before Friday. Our Standards: The Thomson Reuters Trust Principles. Several large brokers got margin calls of close to US$1 billion each over the course of the day. 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. Forbes places Xiang's real-time net worth at $1.2 billion. The LME made a near-unprecedented decision. The seeds of the epic short squeeze were sown last year, when nickel, like all commodities, was rallying from its COVID-era low. ", Britain's Financial Conduct Authority (FCA) and the Bank of England are talking to the London Metal Exchange about the resumption of a fair and orderly market in nickel, the FCA said on Monday in response to a request for comment. 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. 2023 Capital Com Online Investments Ltd. Capital Com Online Investments Ltd is a limited liability company with company number 209236B. 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. read more. Access unmatched financial data, news and content in a highly-customised workflow experience on desktop, web and mobile. Tsingshan's difficulties paying its margin calls have put its . 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. At the current price of nickel, the brokers themselves wouldnt be able to pay their margin calls, they told the LME. In an earlier interview with Chinese news outlet Yicai, Xiang blamed "foreigners making some moves" for nickel's price spike. Bloomberg: Balance of Power focuses on the politics and policiesbeing shaped by the agenda of President Biden's administration. It's been under growing pressure to meet the payments in recent days, the. It did not provide any other details, such as how long the standstill period would last. 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. 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. 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. As the price rose through the London day after offices in Asia had closed, Tsingshan started struggling to pay, the people say. 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 . 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