Xiang didnt believe the rally would last. 2017 - 2018 Yicai Global, Yicai Media Group. At the time of the LME's trading halt, nickel had gained more than 230% in March. 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. Hes in the physical nickel business. And once again, this short squeeze racked up billions in losses for those involved. 2023 Glacier Media Group, All Rights Reserved. Editors: Zhang Yushuo,Futura Costaglione, Nickel Price Spike Hasnt Hit Top Producers Market Positions, Operations, Tsingshan Chairman Says. Save my name, email, and website in this browser for the next time I comment. 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. (Podcast). Nickel Rim South Mine. Now, the traders watched with a mixture of horror and grim fascination as the price went skyward. Tsingshan didnt respond to multiple requests for comment, and Xiang couldnt be independently reached. Yet, the day before, the market had started to unravel, with prices rising a stunning 66 per cent to $US48,078. Tsingshan accounted for about half that amount. 20 kt/a nickel in concentrate) and Fraser Morgan (ca. Harjavalta nickel smelter in Finland (Credit: Boliden). Anglo, which produced 59.3 million tonnes of iron ore last year, aims to halve its Scope 3 indirect emissions by 2040. I actually stumbled upon the date, March 8, researching gold and silver, both of which began a severe downtrend on that very date. Miners, traders, and manufacturers often use the market to make short betsthat is, to make money when prices fall. Its unclear whether he will get his way. Glencore Nickel. The metal is found in all our homes as a key ingredient of stainless steel. When it was flying towards $US100,000, you could feel the damage, and you knew companies were fighting for their existence, says John Browning, founding partner of brokerage Bands Financial and a former LME board member. (Bloomberg) -- A Chinese tycoon who built a massive short position in nickel futures is facing billions of dollars in mark-to-market losses after the metal surged more than 170% in two days, according to people familiar with the matter. For participants in commodities exchanges, a price rally is not necessarily good news. Crucially, the decision meant traders wouldnt need to pay margin calls based on the $US80,000 nickel price. Several large brokers got margin calls of close to $1 billion each over the course of the day. The total volume mined by Glencore in 2021 fell compared to 2020, in part due to supply chain problems and the closure of some mines. Golf's Greatest Holes: Golfing legend Paul McGinley takes television presenter Chris Hollins on a tour of the best golf courses in Ireland and Northern Ireland. The LME is now very likely going to die a slow, self-inflicted death through the loss of confidence in it and its products, predicted Thompson in a tweet. For the LME, the future isunclear. Vale and Glencore announced today that they've entered a partnership to begin a feasibility study to explore Nickel Rim South. How Xiang got to this point is a story that encompasses Chinas emergence as a global economic behemoth. Soaring coal and metal prices powered Swiss mining and trading firm Glencore to a net income of $5 billion in 2021, a notable recovery from its $1.9 billion loss in 2020. Stainless steel with nickel content is omnipresent, for example in buildings, bridges and kitchen appliances. (" Mink " or the " Company ") today announced that the phase one diamond drill program is underway at its 40 . Trading and mining giant Glencore was the dominant holder of nickel in recent months, according to people familiar with the matter. Senior Mine Engineer. Qingshan Holding Group,Nickel,Futures Contract, Paris Looms as Europe's Largest Financial Market, French Economy Minister Says, Alibaba, Spain's El Corte Ingles Department Store Ally on Digital Retail, China's GEM to Supply 100,000 Tons of Lithium Battery Materials to Korea's Ecopro, Toshiba Home Appliances Returns to Profit After Midea Takeover, Chairman Says, How AR is Poised to Change Business Forever. Tsingshan accounted for about half that amount. Now they had to pay big margin calls on the exchange while receiving no margin from their client. document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Company says it puts it into the league of the largest undeveloped nickel deposits in the world. Xiang has told his banks and brokers that he still thinks the nickel price will fall and wants to keep his short position, Bloomberg reported on Thursday, citing people familiar with the matter. Neither party seems very keen on this idea, however. Production 2019. Xiang wanted to increase Tsingshans production dramatically by producing so-called nickel matte for electric vehicle batteries. The world's top five nickel-producing companies. The price move on March 8 created a systemic risk to the market, the LME said two days later. Poseidon Nickel stock opened the day at A$0.04 after a previous close of A$0.04. Tsingshan Group is the partner of Huayou that develops the nickel project. Please try again later. Our marketing business markets nickel and nickel concentrates, as well as by-products and ferronickel. It was a classic short squeeze, as the pain for Tsingshan, its brokers, and other shorts created a self-reinforcing cycle. Investors who had booked trades during the chaotic session in the early hours of Tuesday were furious. . It was 5:42 a.m. on March 8 in London when the nickel market broke. Glencore is still a short opportunity but mid-2022 looks to be the end of long run commodity bear trend. Mark Hansen, chief executive officer of Concord Resources, Help using this website - Accessibility statement. In theory, any price changes on the futures market should offset price changes in the value of the inventoriesas long as the traders canmeet their margin calls. The two major mining companies in Sudbury are working together to . Report this profile Report Report. Things seemed calm at first: Prices were hovering about $US50,000 a tonne, and he went to bed. Some traders and bankers have questioned whether a producer like Tsingshan, which has relatively low production costs and is active in all parts of the supply chain, really needs such a large hedging position. 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 (LME) to suspend trading for the first time in three decades. . At current prices, nickel would comprise 12% of Glencore's EBITDA. 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 exchangeunder review. Glencore Nikkelverk is an important part of the green shift. Already at an all-time high by 5:42 a.m., it lurched higher in stomach-churning leaps, soaring $30,000 in a matter of minutes. Cliff Asness, founder ofAQR 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. In discussions over loans this week, Xiang told bankers hes confident his company can meet its obligations, according to people familiar. The price move on March 8 created a systemic risk to the market, the LME said two days later. Now, people familiar with the matter say, the exchange is likely to introduce such measures as position limits and greater transparency. Last modified on Wed 15 Feb 2023 06.23 EST. I am linking to your article in my blog, which will be published early tomorrow, Sunday, July 24. Its still unclear how much of a risk the nickel rally and a cash drain from topping up margin payments pose to the company. Your email address will not be published. Xiang was aware of flaws in his strategy, people familiar with the matter said. But much of Chinas academic and business community did not believe Russia would attack its neighbour. Tsingshan started building its short position last year in part because Xiang expected a nascent surge in nickel prices to fade, according to people familiar with the matter. Nickel boosts the energy within batteries and, at the same time, allows battery makers to reduce the use of more expensive cobalt. While Russias nickel exports havent been targeted by sanctions, US and European buyers have nonetheless sought alternatives to Russian sources. 2W - 6W. They held a hurried call on Monday evening, but decided to allow the nickel market to continue trading. At 1am on March 8, the market opened. People familiar with the discussions said the exchange would ideally prefer to wait until Xiang has reached a resolution with his banks and brokers. Chinese nickel heavyweight Tsingshan Holding Group was looking at an $8 billion trading loss after nickel prices suddenly exploded higher following Russia 's invasion of Ukraine, The Wall Street . Born in 1958, he started out making frames for car doors and windows in Wenzhou, in eastern China. The company had plans to produce 850,000 tons of nickel in 2022, an increase of 40% in a year, according to a person briefed on them. Hes in the physical nickel business. But while the short squeeze has weighed on Tsingshan's . Iquique Chile Falconbridge . Including positions on the London Metal Exchange and bilateral bets with banks, Xiang still has short holdings in the region of 150,000 tonnes, the people said. The annals of commodity markets are full of tales of producers and traders, from Metallgesellschaft to Sumitomo, that blurred the lines between hedging and speculation and ended with billions of dollars in losses. Remember, when prices move up, traders such as Xiang who have sold futures contracts face margin calls; they must put up more cash to cover potential losses. The penalty is part of the $1.5 billion Glencore agreed to pay to resolve bribery and market-manipulation probes in the US, UK and Brazil. Xiangs short position has now racked upbillions of dollars in losses. That could either result in a huge loss for Tsingshan or the sale of a more than 60 percent stake in the companys Indonesian nickel mine and interest in its industrial park in the southeast Asian country, the report said. Nicknamed Big Shot in Chinese commodity circles, people who know him say he has absolute confidence in his convictions and doesnt hesitate to bet big on his visions for the future. He started increasing his short position on the London Metal Exchange. While investors who sell stocks short want the price to drop, in commodity markets many producers, traders, and users take short positions as a hedge against losses on the physical commodities they hold in inventories. Nickel is also used in certain types of steel which lower magnetic properties. Yet the firm's lucrative . 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. Furious investors and traders. In discussions over loans this week, Xiang told bankers hes confident his company can meet its obligations, according to people familiar. Live from Dubai, connecting Asian markets to the European opens. articles a month for anyone to read, even non-subscribers! Tsingshan has recently threatened in Chinese domestic media to deliver physical metal to the LME, a strong-arm tactic that analysts say would push prices back down. For Xiangs big short position, that was painful. Why bet against nickel when you have a nickel business? This type is different from the mainstream ferro-nickel and nickel pig iron. At that time of day, bleary-eyed traders are typically just glancing at prices as they swig coffee on their way to the office. For Xiangs big short position, that was painful. A year after the short squeeze that brought the LME to the brink of collapse, the nickel market remains barely functional, with trading volumes sharply lower and prices regularly experiencing wild . Massive short positions held by Xiangs Tsingshan Holding Group Co., the worlds largest nickel producer, have gone disastrously awry over the past few days. . (Yicai Global) March 9 --The chairman of Tsingshan Holding Group, the worlds second-largest nickel producer, said this weeks sky-rocketing prices of the metal have not impacted the Chinese firms operations or positions in the futures market. Our fundamental responsibility is market stability, he said. Overseas market players have made some moves, Xiang said, driving up nickel prices in the last two days. Nickel prices usually move a few hundred dollars per ton in a day. 4 354 . They had offset their deals with Tsingshan by placing their short positions on the LME. Four or five of the brokerages that are LME members would have failed, a shock that could have devastated the global metals industry. The fallout was immediate. . 1. Like Comment Share. Were sorry, this feature is currently unavailable. Inability to deliver the products was a big problem for Tsingshan, the analyst added, noting that the company has nickel iron, stainless steel, and nickel matte but noelectrolytic nickel, which is the type traded on the LME. The Chinese government may also play a role. Vale - 208,000 metric tonnes. Excellent coverage of an earth-shaking event. 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. However, Xiang believed the risks to be manageable, the people said, even as an unidentified nickel stockpiler controlled at least half of the inventories on the exchange. Major international companies like BHP Group Ltd. and Rio Tinto Plc hedge against currencies, commodity prices and interest rates on an as required basis. This matters beyond the cozy world of . How to Geta Free Flight to Hong Kong in 500,000 Airline Ticket Giveaway, Stocks Drop for a Second Day; Yields Stay Elevated: Markets Wrap, The SPAC Fad Is Ending in a Pile of Bankruptcies and Fire Sales, Apple Suppliers Are Racing to Exit China, AirPods Maker Says, China Warns Hedonistic Bankers to Toe the Communist Party Line. 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. Trading and mining giant Glencore Plc was the dominant holder of nickel in recent months, according to people familiar with the matter. Worse, the chaos was spreading to other markets: Zinc prices spiked 15% in a few minutes to a record high, only to collapse again. Leeuwin managing director Chris Piggott was a senior geologist at ASX-listed Bellevue when it defined its core discoveries, and was part of the team that defined the greenfields Nova-Bollinger. But the effects of the short squeeze are likely to be felt in other ways. In the short term, apackage of loansfrom Chinese and international banks will help Tsingshan meet its immediate liquidity squeeze. When Norilsk Nickel left the Western markets, Glencore became its main substitute for nonferrous metals. You will be able to view the post at https://dtmagazine.com/money724-302022.php#wrap in the Precious Metals section. From a contractual perspective, you may be . All prices are listed in Australian Dollars. The head of one London metals brokerage recalls feeling sick as he watched the moves, realising what the spike in prices would mean for his company, the market, and the global metals industry. He was awakened by a phone call at 5:30 a.m. One thing is sure: If Xiang can weather the storm, Tsingshans nickel producing assets stand to benefit from the higher prices, offsetting losses from the short. Formerly called Companhia Vale do Rio Doce, Vale is a diversified multinational metals and mining company founded in 1942, and headquartered in Rio de Janeiro, Brazil. 92 132 MT. Glencore's Koniambo mine is located in New Caledonia, mining nickel in this French territory in the South Pacific. Back Submit. The prices that were being seen during that Asian session were becoming disconnected from, I believe, physical reality.. Its not just a casino. Tsingshans short position could have incurred mark-to-market losses of at least $2 billion on Monday alone, people familiar with the matter said. Glencore plc was newly . Feb 2021 - Dec 202111 months. Then came a geopolitical crisis that caught him unawares. Major international companies like BHP Group Ltd. and Rio Tinto Plc hedge against currencies, commodity prices and interest rates on an as required basis. View analysts price targets for GLEN or view top-rated stocks among Wall Street analysts. Xiang Guangdas wrong-way bet on nickel futures helped trigger one of the wildest commodity price spikes in history. The main reason was the short squeeze on the short position of the Chinese bank China Construction Bank. Trafigura Lines Up Russia Aluminum Deal in Challenge to Glencore. Just after 6am, the price of nickel passed $US100,000 a tonne. 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