He was awakened by a phone call at 5:30 a.m. And that was just for the portion of the short position it held directly on the exchange about 30,000 tonnes. 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. , Mar 23, 2022. But its extremely unusual for an exchange to cancel whole sessions of trading after the fact. Nickel. Shanghais most-traded nickel futures contract soared to CNY228,810 (USD36,235) a tonthe same day, and trading is suspended today. Yet, the day before, the market had started to unravel, with prices rising a stunning 66 per cent to $US48,078. He was awakened by a phone call at 5.30am. 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. Glencore is a leading producer and marketer of nickel globally and Wayne has responsibility for the operation of mines and processing facilities in Australia, New Caledonia, Canada and Norway. 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. For the LME, the future isunclear. 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. 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. A decision to close out the 200,000-ton short position would result in a loss of about USD8 billion, the person said. Anyone using the LME needs to understand that. View analysts price targets for GLEN or view top-rated stocks among Wall Street analysts. Overseas market players have made some moves, Xiang said, driving up nickel prices in the last two days. The LMEs special committee held another call at about 6 a.m. Now they recognized that they had tosuspend trading. Yet the firm's lucrative . Just after 6 a.m., the price of nickel passed $100,000 a ton. Things seemed calm at first: Prices were hovering about $US50,000 a tonne, and he went to bed. The seeds of the epic short squeeze were sown last year, when nickel, like all commodities, was rallying from its Covid-era low. Hansen of Concord Resources argues that financial investors who traded nickel last week should have been prepared for the LME to step in. Chinese entrepreneur Xiang Guangda has been caught out by nickels price surge. Others in the market may also push up prices anticipating that short covering. 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. The price move on March 8 created a systemic risk to the market, the LME said two days later. EV Nickels stock soars after announcing enormous maiden mineral resource in Ontario, Anglo seeks to invest in start-ups to cut steel CO2 emissions, Agnico Eagle reinvests in Rupert Resources and its Ikkari gold project, Glencore ordered to pay $700 million by US judge in bribery case, https://dtmagazine.com/money724-302022.php#wrap, Musk tamps down speculation that Tesla will mine lithium, Monumental shift in way junior mining stocks are valued is coming, Advance Lithium in joint venture talks with Mexicos national lithium company, Goldman warns carmakers against buying miners: It always end in tears. People familiar with the discussions said the exchange would ideally prefer to wait until Xiang has reached a resolution with his banks and brokers. 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. Nickel prices usually move a few hundred dollars per ton in a day. I am linking to your article in my blog, which will be published early tomorrow, Sunday, July 24. Others took to social media. 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. Nickel is a raw material that is characterized by exceptional resistance and special properties, thanks to which it has many applications. The company has assured creditor banks in China that its . MINK. Short Term. Tsingshan Group placed a short nickel order, and the matter of being shorted by the opponent was brushed off. Those past scandals forced reforms on the exchange. He blamed foreigners making some moves for nickels price spike in an interview with Chinese news outlet Yicai. Its not clear to what extent Xiang saw his position as merely a hedge or as a speculative bet. Tsingshan needs to increase the contract margins or roll over the futures if it decides to keep the contracts, which would require a huge amount of cash, an analyst told Yicai Global. Hansen of Concord Resources argues that financial investors who traded nickel last week should have been prepared for the LME to step in. Supervised survey and mine scheduling groups. Multinational commodities company Glencore has temporarily reduced production at the Murrin Murrin nickel-cobalt operation in Western Australia following a malfunction at an acid plant at the site.. Glencore's Murrin Murrin fully integrated nickel and cobalt operation is located approximately 880km east of Perth in the north-eastern Goldfields region. Save my name, email, and website in this browser for the next time I comment. Most market participants expect nickel prices to come back down once the crisis around Xiangs position has been resolved. 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 companyTsingshan Holding Group Co.On Monday, a week after trading had been suspended, Xiang wasclose to securing a loan facilityfrom JPMorgan Chase & Co. and other banks that would allow him to maintain his short position and could lead to the market reopening. 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. 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. In August 2021, Glencore increased its medium-term emission reduction target to a 50% reduction by 2035 on 2019 levels and introduced a new short-term target of a 15% reduction by 2026 on 2019 levels. Cash and short-term investments. We're taking you for a deep dive into the world of copper - a versatile metal and important component for a low-carbon future. I see all automakers within a short time creating their own 4680 . And once again, this short squeeze racked up billions in losses for those involved. The world's top five nickel-producing companies. For the LME to cancel nickel trades between willing buyers and sellers is unforgivable. People forgot that this isnt a video game retailer; its an important physical commodity.. For participants in commodities exchanges, a price rally is not necessarily good news. Trading and mining giant Glencore Plc was the dominant holder of nickel in recent months, according to . 5 000 MT. We produce some of the worlds purest nickel. Nickel prices usually move a few hundred dollars per ton in a day. Massive short positions held by Xiangs Tsingshan Holding Group Co., the worlds largest nickel producer, have gone disastrously awry over the past few days. But the obvious consequence of so much nickel hitting the market, he believed, would be a fall in its price. 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. Glencore is a leading producer and marketer of nickel, as well as a recycler of nickel-containing materials such as batteries. For participants in commodities exchanges, a price rally is not necessarily good news. At 1am on March 8, the market opened. 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. Related Article: Nickel price spike purely financial but Tsingshan effect could linger. Market speculation has it that Tsingshan has a short position of about 200,000 tons of nickel, which it cannot deliver due to a lack of spot product after being assailed and squeezed out by US and European commodity futures giants such as Glencore, China Securities Journal reported yesterday. 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. . In a squeeze, rising prices put traders betting on a drop in an ever-tougher financial position, forcing them or brokers and banks doing business on their behalf to buy the asset, a trade known as short covering that can drive prices even higher. Tsingshan accounted for about half that amount. As the price rose through the London day after offices in Asia had closed, Tsingshan started struggling to pay, the people say. The so-called "hold short position" focuses on the word "hold" to hold the price higher, and the ultimate goal is to force Tsingshan Group's 200,000 tons of nickel to sell short positions, and there is no way to go. 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. In theory, any price changes on the futures market should offset price changes in the value of the inventories as long as the traders can meet their margin calls. But much of Chinas academic and business community did not believeRussia would attackits neighbor. Evaporating liquidity. The latest price was A$0.04 (25-minute delay). Investors who had booked trades during the chaotic session in the early hours of Tuesdaywere furious. Despite the recent upheaval, his company still remains the biggest in the nickel industry. Most analysts sided with Xiang, at least in the medium term, believing that nickel production led by Tsingshan and its competitors in Indonesia would outpace demand. Sulphuric acid. Glencore plc is a Swiss multinational commodity trading and mining company with headquarters in Baar, Switzerland. That put Tsingshans banks and brokers, which includeJPMorgan Chase,BNP Paribas, andStandard Chartered,in a bind. Summary. Baar, Switzerland 29 July 2022. Glencore is still a short opportunity but mid-2022 looks to be the end of long run commodity bear trend. Those 18 minutes will haunt me, says the executive, who wasnt authorized to speak publicly. Even at that level, clients of LME brokers had failed to pay some $500 million of margin calls in relation to their short positions on the exchange, according to a person familiar with the matter. Tsingshans were even larger, numbering about $US3 billion, according to a calculation based on its total short position which, even after Xiang had closed out a portion of the bet in previous weeks, was over 150,000 tonnes. For most of the past decade, they'd traded between $10,000 and $20,000. Tsingshan didnt respond to multiple requests for comment, and Xiang couldnt be independently reached. The wild rise of nickel drew comparisons to the short squeezes in meme stocks such as GameStop that gripped retail investors for much of last year. Wayne has over 20 years of operational management experience of complex hydrometallurgical plants, specialising in transformation of operational and . The LME made a near-unprecedented decision. But while the short squeeze has weighed on Tsingshans short-term cash flows, strong nickel prices are to its advantage in the long run. Furious investors and traders. China's manufacturing purchasing managers' index (PMI) climbed to 52.6 last month, the highest reading since April 2012. Glencore's original trading business is still a powerhouse and is . The price move on March 8 created a systemic risk to the market, the LME said two days later. 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. Vale is the world's largest producer of nickel, one of the most versatile metals in existence. 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. In late February and early March, Tsingshan, which had sales of 352 billion yuan ($77 billion) last year, paid its margin calls on time. Trading and mining giant Glencore Plc was the dominant holder of nickel in recent months, according to people familiar with the matter. 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. China's manufacturing activity expanded at the fastest pace in more than a decade in February. Beijing is supportive of him, Xiang told contacts recently. Vale and Glencore announced today that they've entered a partnership to begin a feasibility study to explore Nickel Rim South. 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 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. 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. 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. Yet the day before, the market had started to unravel, with prices rising by astunning66% to $48,078. Among them were some of the biggest names on Wall Street. At 8:15 a.m., the screens stopped flashing, hours before the in-person pit trading session was even set to begin. 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 . 2023 Glacier Media Group, All Rights Reserved. This was the most disorderly move in a metal Ive seen in my career, says Mark Hansen, CEO of trading house Concord Resources. The Nikkelverk Operations. . Raglan Mine is a large nickel mining complex in the Nunavik region of northern Quebec, Canada.It is located approximately 100 kilometres (62 mi) south of Deception Bay. Mark Hansen, chief executive officer of Concord Resources, Help using this website - Accessibility statement. The fallout was immediate. Hes in the physical nickel business. Trading and mining giant Glencore Plc was the dominant holder of nickel in recent months, according to people familiar with the matter. The nickel market was anything but calm. 6W - 9M. When Norilsk Nickel left the Western markets, Glencore became its main substitute for nonferrous metals. All Rights Reserved. Some aggrieved traders are already preparing to take legal action against the exchange. Undeterred, the Chinese tycoon has told banks he wants tomaintain his position, and has asked them to keep funding him despite the losses. At the current price of nickel, the brokers themselves wouldnt be able to pay their margin calls, they told the LME. In the short term, a package of loans from Chinese and international banks will help Tsingshan meet its immediate liquidity squeeze. Undeterred, the Chinese tycoon has told banks he wants to maintain his position, and has asked them to keep funding him despite the losses. Xiangs short position has now racked upbillions of dollars in losses. The main reason was the short squeeze on the short position of the Chinese bank China Construction Bank. 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