Distribution and use of this material are governed by Crucially, the decision meant traders wouldnt need to pay margin calls on the basis of the US$80,000 nickel price. (Bloomberg) A unit of China Construction Bank Corp was given extra time by the London Metal Exchange to pay hundreds of millions of dollars in margin calls it missed on Monday amid an unprecedented rise in nickel prices, in this case According to people familiar with . 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. See here for a complete list of exchanges and delays. Executives from Goldman Sachs Group Inc. voiced their displeasure at the decision on a call with Chamberlain. 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. Its also one of the most important raw materials needed inmaking batteriesfor electric vehicles. A Glencore spokesman declined to comment. Hansen of Concord Resources argues that financial investors who traded nickel last week should have been prepared for the LME to step in. 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. A week earlier, nickel was trading around $25,000 and the price of the metal has more than quadrupled in a matter of days. Tsingshan has been finding it difficult to pay margin calls to its creditors, the report said. 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. Given that JPMorgan was reported as the biggest trading counterparty against which Tsingshans nickel trades were made, the US bank led the subsequent agreement to arrange a rescue credit facility, secured from various lenders, including China Construction Bank (CCB), to help the Chinese nickel giant address its immediate liquidity squeeze. They held a hurried call on Monday evening, but decided to allow the nickel market to continue trading. 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. And never trade money that you cannot afford to lose. 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. https://www.wsj.com/articles/chinese-nickel-giant-tsingshan-faces-8-billion-trading-loss-as-ukraine-war-upends-market-11646765353. Nickel prices shot up as much as 250% in two days on the LME at the start of this week. 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. Everything changed when Russia invaded Ukraine. Its not clear to what extent Xiang saw his position as merely a hedge or as a speculative bet. As the price rose through the London day after offices in Asia had closed, Tsingshan started struggling to pay, the people say. 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 . This copy is for your personal, non-commercial use only. Screen for heightened risk individual and entities globally to help uncover hidden risks in business relationships and human networks. 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. The price move on March 8 created a systemic risk to the market, the LME said two days later. Tsingshan's nickel matte plans could be 1st step into lithium battery value chain. 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. 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. 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 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 . It could be even larger than that when positions taken through intermediaries are taken into account, people separately said. articles a month for anyone to read, even non-subscribers! 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. 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. The new historic high is nearly twice the previous record of $51,600 in 2007. The Companys registered office is at Bahamas Financial Centre, 3rd Floor, Shirley and Charlotte Street, P.O. Xiang Guangda, the actual controller of Tsingshan, believes that the entry of so much nickel into the market will bring nickel prices down. . Nickel prices have since fallen and the three-month nickel last settled at $23,371/tonne on 3 November. read more. Another key factor in the recent price volatility was the massive nickel short squeeze built up by Chinas Tsingshan Holding Group, the worlds largest stainless steel producer. Traders must deposit cash, known as margin, with their brokers on a regular basis to cover potential losses on their positions. 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. The LME did not put it into default, instead giving it more time to pay. 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. Exchanges sometimes cancel trades when technology glitches or fat fingers cause one-off mistakes. 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. The Initial Margin was $20,000 per contract. Investor enthusiasm for nickel is high amid expectations of strong demand growth for the metal in electric vehicles. Box N-4865, Nassau, Bahamas. People familiar with the discussions said the exchange would ideally prefer to wait until Xiang has reached a resolution with his banks and brokers. Tsingshan agreed standstill with JPMorgan-led group of banks, Talks continue on loan facility to backstop short position. 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. China scoffs at FBI claim that Wuhan lab leak likely caused COVID pandemic, China's abrupt reopening sparks student accommodation crisis in Australia, Reporting by Pratima Desai; additional reporting by Sinead Cruise and Eric Onstad in London; Editing by Megan Davies, Jan Harvey, Tim Ahmann and Cynthia Osterman, U.S. House panel approves bill giving Biden power to ban TikTok, Russia tries to close ring on Bakhmut as Ukrainians mount 'furious resistance', Wall St falls as yields rally on hawkish comments, data, Erdogan indicates Turkey elections to be in May, three months after quake, Massachusetts U.S. Attorney taps ex-DOJ watchdog to defend her in ethics probe, Another BoE rate rise isn't inevitable, Bailey says, China's Xi cements ties with Belarus leader against background of Ukraine war, Russia's Lavrov meets Indian counterpart ahead of G20 talks, Exclusive news, data and analytics for financial market professionals. Privacy Policy | The simple fact here is that we did not have visibility over the size of the risk, Matthew Chamberlain, the LMEs chief executive, also stated. 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. Then on March 7, nickel's price began its parabolic. Assessing the Incremental Costs of Regulation and Supervision Faced by Next-Gen Operating Models for Bankers and Advisors, Macroprudential Policy and Real Estate Funds. 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. Tsingshan has been struggling to pay margin calls to its brokers, according to people familiar with the situation. 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. Tsingshan was unable meet margin calls and only avoided bankruptcy after . FY18 RESULTS, FY19 GUIDANCE AND CORPORATE PRESENTATION 22 AUGUST 2018 AGENDA Results Guidance Corporate Operations Growth Exploration Nickel Market DISCLAIMER AND FORWARD Bloombergs Joe Deaux reports. 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. Nickels price moved sharply higher in the week after Russias invasion. By early this year, it had taken ownership of more than half of the available nickel in LME warehouses. Three-month nickel on the LME more than doubled to over $100,000 a ton yesterday before the LME stepped in to halt trading of the metal. 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. Its nickel matte production in Indonesia is nearly 8,000 tonnes per month, according to the Shanghai Securities News. Why bet against nickel when you have a nickel business? Perdagangan nikel di LME dihentikan sementara sejak Selasa lalu. 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. The LME suspended trading in nickel on Tuesday morning after one of the most dramatic price spikes in commodity market history. Tsingshan is also NIC's majority shareholder with a 21.15% stake through Shanghai Decent Investment. Then on March 7, nickels price began its parabolic ascent, surging from US$30,000 a ton to more than US$50,000. But the effects of the short squeeze are likely to be felt in other ways. See here for a complete list of exchanges and delays. Distribution and use of this material are governed by Last chance for up to $40 off TurboTax, All Jeans + Pants 25% off! 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. Prices for the metal, used in stainless steel and electric vehicle batteries, were last in that range in December. Solugen Bio has built a chemical plant that produces all manner of chemical-based products using bio-based feedstock instead of fossil fuels. Regulation and Supervision Faced by Next-Gen Operating Models for Bankers and Advisors, tsingshan nickel margin call Policy and Real Funds... 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