A short squeeze is a market condition caused by massive short positions. Join the 500.000+ traders worldwide that chose to trade with Capital.com, Also you can contact us: Others took to social media. The unprecedented rally prompted the 145-year-old exchange to suspend nickel trading Tuesday. Tsingshan Holding Group held the biggest short position for nickel on the LME. At the current price of nickel, the brokers themselves wouldnt be able to pay their margin calls, they told the LME. Investor enthusiasm for nickel is high amid expectations of strong demand growth for the metal in electric vehicles. The industry leader for online information for tax, accounting and finance professionals. 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. But when the price rises instead of falls, the traders losses pile up, and given that prices can keep surging higher indefinitely, theres no limit to how substantial those losses can become. 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. The big fear was that Tsingshan would struggle to make margin calls with its bankers, potentially facing billions of dollars in losses. 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. The first source said that the banks could potentially earn money on a bridge loan secured by future nickel production if Tsingshan paid them back over time as it produced nickel. Build the strongest argument relying on authoritative content, attorney-editor expertise, and industry defining technology. He was awakened by a phone call at 5:30 a.m. Short-covering trades made last week by the Chinese billionaire contributed to a swift, huge surge. our Subscriber Agreement and by copyright law. 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. 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. Access unmatched financial data, news and content in a highly-customised workflow experience on desktop, web and mobile. All quotes delayed a minimum of 15 minutes. 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. 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. As of the evening of March 13, the LME had yet to announce a date for nickel trading to resume. This report studies the Ferronickel market, covering market size for segment by type (Ferronickel (Nickel15%), Ferronickel (Nickel15-25%), etc. 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 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. Bloomberg: Balance of Power focuses on the politics and policies being shaped by the agenda of President Biden's administration. 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. Prices exploded, thanks mainly to one companyindeed, one man. It also doesn't create waste and may help fight the climate crisis. Tsingshan thus desperately scrambled to buy nickel to cover its short position, which only added further upward pressure on prices. Nevertheless, the short squeeze did trigger a whopping $8 billion margin call on Guangda. Then, as now, a key factor was the intervention of the exchange. And never trade money that you cannot afford to lose. Nickel prices usually move a few hundred dollars per ton in a day. Some think this could herald the end of the exchange itself. The LME did not put it into default, instead giving it more time to pay. Now, people familiar with the matter say, the exchange is likely to introduce such measures as position limits and greater transparency. The nickel market was anything but calm. 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. Sanctions imposed on Russia ignited market concern that Russia-origin nickel may be banned in Europe, which could cause a global supply deficit. Late Tuesday, the exchange said it anticipates trading wont resume before Friday. 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. The prices that were being seen during that Asian session were becoming disconnected from, I believe, physical reality.. Browse an unrivalled portfolio of real-time and historical market data and insights from worldwide sources and experts. Creditors and banks who acted for Tsingshan were demanding margin settlements and the closing of all positions. The Chinese government may also play a role. Advertise | Careers | Editorial Guidelines | See here for a complete list of exchanges and delays. At 8:15 a.m., the screens stopped flashing, hours before the in-person pit trading session was even set to begin. .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. Its been under growing pressure to meet the payments in recent days, the people said. Now they had to pay big margin calls on the exchange while receiving no margin from their client. 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 . 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 fear was that Tsingshan could not make its margin calls, interim payments to parties on the other side of the trade. 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. Tsingshan was unable meet margin calls and only avoided bankruptcy after . During the standstill agreement, the company and banks will discuss a standby secured liquidity facility, Tsingshan said. By April, nickel prices began to fall below $35,000/tonne and Tsingshan began to close its short positions and settled its margin calls. (Podcast). This copy is for your personal, non-commercial use only. 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. 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. In an earlier interview with Chinese news outlet Yicai, Xiang blamed "foreigners making some moves" for nickel's price spike. As the market was picking up on the short squeeze of Tsingshan, the LME had decided to intervene. Why? losed Joint Stock Company FinTech Solutions. Save my name, email, and website in this browser for the next time I comment. Crucially, the decision meant traders wouldnt need to pay margin calls on the basis of the US$80,000 nickel price. Is the Strength of Big Tech Regulation Sufficient at Present? For most of the past decade, theyd traded between US$10,000 and US$20,000. Reuters, the news and media division of Thomson Reuters, is the worlds largest multimedia news provider, reaching billions of people worldwide every day. Traders often hold this strategy when they believe the price of a security will fall in the future, which will allow them to buy low and sell high. . Some started hurrying to buy back nickel contracts, sending the price of nickel spiraling ever higher. 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Tsingshan has been finding it difficult to pay margin calls to its creditors, the report said. . 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. We expect the EBITDA margin to be around . Jack Farchy, Alfred Cang and Mark Burton, Bloomberg News. 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. Its unclear whether he will get his way. https://www.wsj.com/articles/chinese-nickel-giant-tsingshan-faces-8-billion-trading-loss-as-ukraine-war-upends-market-11646765353. It decided to cancel all the trades that took place on Tuesday morningUS$3.9 billion of them, according to a Bloomberg calculation. Assessing the Incremental Costs of Regulation and Supervision Faced by Next-Gen Operating Models for Bankers and Advisors, Macroprudential Policy and Real Estate Funds. Despite that, reserves that can be economically mined are limited. China's Tsingshan Holding Group has reached agreements with two companies to swap its . They had offset their deals with Tsingshan by placing their own short positions on the LME. Nickel prices shot up as much as 250% in two days on the LME at the start of this week. The extra charge kicks in at close of business on Tuesday. 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. Many traders expect the price to return to more normal levels once the margin call chaos has been resolved. 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 City A.M. during the week after the suspension. About 50,000 tonnes of Xiang's total nickel short position of over 150,000 tonnes is held through an over-the-counter position with JP Morgan, which means Tsingshan owed the bank about US$1 . 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.. 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. Known as "Big Shot" in China for his imposing presence in the metal industry, Xiang Guangda, the founder of the world's 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 Tsingshan has been struggling to pay margin calls to its brokers, according to people familiar with the situation. The contribution of a dab has been 44 million to . Then on March 7, nickel's price began its parabolic. 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. For the LME to cancel nickel trades between willing buyers and sellers is unforgiveable. Tsingshan's difficulties paying its margin calls have put its . Are you considering whether or not to trade nickel or want to learn more about the market? Our Standards: The Thomson Reuters Trust Principles. Neither party seems very keen on this idea, however. The most comprehensive solution to manage all your complex and ever-expanding tax and compliance needs. Read on for our analysis on the recent LME nickel short squeeze and the market outlook. "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. The Companys registered office is at Bahamas Financial Centre, 3rd Floor, Shirley and Charlotte Street, P.O. 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. Now, the traders watched with a mixture of horror and grim fascination as the price went vertical. US manufacturing sector contracts again; raw material prices rise, U.S. House panel approves bill giving Biden power to ban TikTok, Additional reporting by Eric Onstad in London, by the Beijing newsroom and Min Zhang in Beijing; editing by Carmel Crimmins, Exclusive: Tesla readies revamp of Model Y codenamed 'Juniper', EV startups from Lucid to Rivian see demand fade, supply chain issues linger, Lilly to cut some list prices by 70% and offer $25 insulin, Exclusive: Biden administration to move on Midwest ethanol-blended gasoline rule this week -sources, Exclusive news, data and analytics for financial market professionals. 3.1 What is the margin call to Tsingshan? 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 $15 billion. Only you can decide whether nickel is a good buy or not. A sharp surge in nickel prices triggered margin call fears at the London Metal Exchange which suspended trading after prices doubled in hours. In the meantime, the nickel market is on ice, with traders unable to exit their positions, and many billions of dollars tied up in margin calls. If nickel prices stay lofty it could complicate the energy transition with electric vehicle batteries costing more to produce. read most from bloomberg It did not provide any other details, such as how long the standstill period would last. read more. On February 22, 2023, Yangjiang News, at the "New Track, Great Future--Qingshan S32001 Duplex Steel Channel Market Launch Conference" hosted by Qingyi Steel Margin call ini membuat harga nikel meledak dan menembus US$ 100 ribu per ton dari hanya US$ 25 ribu per ton. Tsingshan Holdings was founded in 1988 by Xiang Guangda in Wenzhou. Box N-4865, Nassau, Bahamas. 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. A short position is created when a trader sells a security he does not own, with the intention of repurchasing it later at a lower price. ", 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. Capital Com is an execution-only service provider. 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 . But this week the rally became a melt-up, with prices surging as much as 250 per cent in little more than 24 hours, to an all-time high of $US101,365 a tonne. 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. Weve received a lot of phone calls today, he said. https://www.wsj.com/articles/nickel-market-crisis-sends-london-metal-exchange-scrambling-to-prevent-damage-11646858558. The price move on March 8 created a systemic risk to the market, the LME said two days later. Tsingshan yang dimiliki oleh swasta secara harfiah memiliki arti "gunung hijau", berbasis di kota Wenzhou di China dan memiliki . Tsingshan, the world's largest stainless steel producer, is rumoured to have built a big short position in nickel before a 250% rally in [] The LME convened its special committee, a small group of metals and legal experts with the power to issue emergency rules for the market. Others in the market may also push up prices in anticipation of that short covering. NIC's operations and cash flow remained stable in 2022 despite Tsingshan's significant loss on its nickel short position in March 2022. Exchanges. LME brokers and their clients were hit with margin call after margin call. 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. Tsingshan is also a nickel miner and operates nickel pig iron mines and production facilities. Today, Tsingshan is the biggest nickel producer in the world, accounting for around 20% of the global market. 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. Bloomberg: Balance of Power focuses on the politics and policiesbeing shaped by the agenda of President Biden's administration. 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. Reuters could not determine how large Tsingshan's short position currently is after it cut its exposure. Receiving no margin from their client the unprecedented rally prompted the 145-year-old tsingshan nickel margin call to suspend trading... ; s Tsingshan Holding Group has reached agreements with two companies to swap its in Wenzhou mined limited. It decided to cancel nickel trades between willing buyers and sellers is unforgiveable in losses content a! On desktop, web and mobile by the Chinese billionaire contributed to a swift, surge! Very keen on this idea, however worldwide that chose to trade with Capital.com, also can... 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