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. 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. UNFORGIVEABLE,tweetedMark Thompson, a former trader at Trafigura and Apollo. 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. Brokers, in turn, must hold margin at the clearing house, LME Clear. 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. Our Standards: The Thomson Reuters Trust Principles. ), by sales channel (Direct Channel, Distribution Channel), by player (Shandong Xinhai Technology, Tsingshan Holding Group, Eramet, Linyi Yichen Alloy, Jiangsu Delong Nickel Industry . 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. Others in the market may also push up prices in anticipation of that short covering. 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 . 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. The current events are unprecedented, LME said in a notice. Just after 6 a.m., the price of nickel passed US$100,000 a ton. Copyright | The nickel market was anything but calm. Bloomberg: Balance of Power focuses on the politics and policies being shaped by the agenda of President Biden's administration. https://www.wsj.com/articles/nickel-market-crisis-sends-london-metal-exchange-scrambling-to-prevent-damage-11646858558. Its been under growing pressure to meet the payments in recent days, the people said. Four or five of the brokerages that are LME members would have failed, a shock that could have devastated the global metals industry. 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. This exact scenario emerged in early March in the LMEs nickel market following the escalation of the Russia-Ukraine military conflict, with Chinese nickel-maker Tsingshan Holding Group the unfortunate short seller in this episode. 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 giant commodity trader Glencore Plc also had a position on the LME that would benefit from rising prices. 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. Undeterred, the Chinese tycoon has told banks he wants tomaintain his position, and has asked them to keep funding him despite the losses. If you rely on the information on this page then you do so entirely on your own risk. People forgot that this isnt a video game retailer; its an important physical commodity.. (HNI) to produce higher-grade nickel matte. Tsingshan agreed standstill with JPMorgan-led group of banks, Talks continue on loan facility to backstop short position. Our fundamental responsibility is market stability, he told Bloomberg TV. our Subscriber Agreement and by copyright law. 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The London Metal Exchange initially announced rule changes late Monday in respond to a daily spike of as much of 90% (Reuters) Nickel, used in stainless steel and electric-vehicle batteries . document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Copyright International Banker 2023 | All Rights Reserved Subscription | About us | 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. Traders must deposit cash, known as margin, with their brokers on a regular basis to cover potential losses on their positions. Xiang shrugged off suggestions to reduce short positions, Tsingshans nickel short position stood at about 150,000 tons. Join the 500.000+ traders worldwide that chose to trade with Capital.com, Also you can contact us: 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. Those 18 minutes will haunt me, says the executive, who wasnt authorized to speak publicly. Tsingshan sold 200,000 ton March 2023 contracts at price of $20 per kilo. 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. 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 . The company had a further 120,000 tons or more in short positions off the exchange, in bilateral deals with such banks as JPMorgan Chase & Co. and Standard Chartered Plc. One of the world's biggest nickel and stainless steel producers, Tsingshan started building a short position -- a wager that prices will fall -- in the nickel market last year. Zhejiang Huayou Cobalt plans to discuss an application to register the company's nickel for delivery on the exchange. He ranked 235th on the 2021 Hurun's China rich list, which puts his net worth closer to $4.2 . 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. Not everyone shared his pessimism about prices. 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. Some think this could herald the end of the exchange itself. 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. Yet the day before, the market had started to unravel, with prices rising by astunning66 per cent to US$48,078. The price spike left Tsingshan exposed to $8 billion USD of trading losses whilst struggling to meet their margin calls. Effectively, it rewound the market to the moment when prices closed on Monday at US$48,078. For most of the past decade, theyd traded between US$10,000 and US$20,000. 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. 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. Indeed, Russia is the worlds third-biggest nickel producer after Indonesia and the Philippines. Creditors and banks who acted for Tsingshan were demanding margin settlements and the closing of all positions. The annals of commodity markets are full of tales of producers and traders, fromMetallgesellschaftto Sumitomo, that blurred the lines between hedging and speculation and ended with billions of dollars in losses. Short-covering trades made last week by the Chinese billionaire contributed to a swift, huge surge. Most analysts sided with Xiang, at least in the medium term, believing that nickel productionled by Tsingshan and its competitors in Indonesiawould outpace demand. call +44 20 3097 8888 support@capital.com. 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. 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. Tsingshan, who pioneered the Rotary Kiln Electric Furnace (RKEF) process to produce low-cost nickel pig iron (NPI), is now the dominant player in the Indonesian NPI industry and a global leader in NPI processing technology, including having implemented the Argon Oxygen Decarburisation process which incorporates the direct hot charging of NPI into the stainless steel production process for a . Pada titik ini, posisi short Tsingshan dibekukan. Are you considering whether or not to trade nickel or want to learn more about the market? 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) in a move that could help calm markets.. During the standstill agreement, the company and banks will discuss a standby secured liquidity facility, Tsingshan said. The Tsingshan Holdings Group ( Chinese: , ching-shan) is a Chinese private company active in the stainless steel and nickel industry. Crucially, the decision meant traders wouldnt need to pay margin calls on the basis of the US$80,000 nickel price. The London nickel market has been closed since last Tuesday morning, when the exchange intervened after prices spiked as much as 250% in two days, and the standstill announced by Xiangs Tsingshan Group Holding Co. could provide the certainty needed to restart trading. Russia is the worlds third-largest producer of nickel and its largest exporter of refined nickel metalthe type deliverable on the LME. 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. Keep in mind that past performance is no guarantee of future returns. By April, nickel prices began to fall below $35,000/tonne and Tsingshan began to close its short positions and settled its margin calls. Investors who had booked trades during the chaotic session in the early hours of Tuesdaywere furious. This created an unprecedented LME nickel short squeeze. 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. 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. 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. 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. The Chinese government may also play a role. 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. Reuters could not determine how large Tsingshan's short position currently is after it cut its exposure. The super spike was driven by holders of short positions, including Tsingshan and its brokers, rushing to close them out. The question is, will it continue to fail? Ghali posited to CNN. 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 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 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. 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. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents. It did not provide any other details, such as how long the standstill period would last. 3.1 What is the margin call to Tsingshan? This was the most disorderly move in a metal Ive seen in my career, says Mark Hansen, chief executive officer of trading house Concord Resources Ltd. We had a frenzy based on speculation that accelerated on Monday and Tuesday. 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. The industry leader for online information for tax, accounting and finance professionals. Traders must deposit cash,. According to industry members association International Nickel Study Group (INSG), stainless steel production accounts for over two-third of nickel demand in 2020, while the use in batteries for EVs remained low at 6%. It was 5:42 a.m. on March 8 in London when the nickel market broke. But its extremely unusual for an exchange to cancel whole sessions of trading after the fact. Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com. Tsingshan is an excellent Chinese enterprise, and our positions and operations dont have any problems.. 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tsingshan nickel margin call