Screen for heightened risk individual and entities globally to help uncover hidden risks in business relationships and human networks. https://www.wsj.com/articles/chinese-nickel-giant-tsingshan-faces-8-billion-trading-loss-as-ukraine-war-upends-market-11646765353. 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. Chinese nickel giant Tsingshan's hedge backfired Commodities companies of course generally benefit from higher prices for their products. As the price rose through the London day after offices in Asia had closed, Tsingshan started struggling to pay, the people say. 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. 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. 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. Matthew Chamberlain, the LMEs chief executive officer, had stayed up to watch. Matthew Chamberlain speaks on "Bloomberg Markets: Europe.". Among them were some of the biggest names on Wall Street. We expect the LME nickel price to remain volatile in the near term, as the global nickel market finds equilibrium following recent events, S&Ps Sappor added, warning that an elevated risk of another short squeeze hitting the LME nickel market in the near term continued, given the presence of both a dominant warrant-holding position on available LME stocks and Tsingshans short position. The London Metal Exchange plans to resume trading in nickel, a week after it was suspended when the price of the metal surged to over $100,000 a ton. Those past scandals forced reforms on the exchange. Last chance for up to $40 off TurboTax, All Jeans + Pants 25% off! 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If the market moves against those positions, they receive a margin call requesting further funds and if they fail to pay, they can be forced to close their position. But the effects of the short squeeze are likely to be felt in other ways. The fear was that Tsingshan could not make its margin calls, interim payments to parties on the other side of the trade. An employee. The Companys registered office is at Bahamas Financial Centre, 3rd Floor, Shirley and Charlotte Street, P.O. 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. Opinion. Keep in mind that past performance is no guarantee of future returns. Tsingshan agreed standstill with JPMorgan-led group of banks, Talks continue on loan facility to backstop short position. (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 . 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 . 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. For the LME, the future isunclear. Build the strongest argument relying on authoritative content, attorney-editor expertise, and industry defining technology. WATCH: Trading on LME is now set to resume Wednesday. All quotes delayed a minimum of 15 minutes. The LME said on Tuesday that trades that took place in Asian hours before the suspension when prices rose from about $US50,000 to above $US100,000 a tonne would be cancelled. Continue reading your article witha WSJ subscription, Already a member? The new historic high is nearly twice the previous record of $51,600 in 2007. 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.. Russia is the worlds third-largest producer of nickel and its largest exporter of refined nickel metalthe type deliverable on the LME. document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Copyright International Banker 2023 | All Rights Reserved Subscription | About us | Reuters, the news and media division of Thomson Reuters, is the worlds largest multimedia news provider, reaching billions of people worldwide every day. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. . Nickel prices have since fallen and the three-month nickel last settled at $23,371/tonne on 3 November. 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Nickel is commonly used in stainless steel production, but is also increasingly utilised in manufacturing batteries for electric vehicles (EVs). One of Tsingshans brokers, CCBI Global Markets, also failed to pay hundreds of millions of dollars in margin calls on its nickel positions on March 7. Not everyone shared his pessimism about prices. Still, contracts on the LME are backed by physical metal in a network of warehouses around the world, providing a direct link with the real-world metals industry. The LMEs special committee held another call at about 6 a.m. Now they recognized that they had tosuspend trading. 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%. 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. Distribution and use of this material are governed by Then on March 7, nickels price began its parabolic ascent, surging from US$30,000 a ton to more than US$50,000. Box N-4865, Nassau, Bahamas. But since last year, Tsingshan has also started to produce a source of nickel for batteries. 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. 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. 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. Many traders expect the price to return to more normal levels once the margin call chaos has been resolved. The company paid at least some of its margin calls early on Monday, according to a person familiar with the matter. It could be even larger than that when positions taken through intermediaries are taken into account, people separately said. The head of one London metals brokerage recalls feeling sick as he watched the moves, realizing what the spike in prices would mean for his company, the market, and the global metals industry. At the current price of nickel, the brokers themselves wouldnt be able to pay their margin calls, they told the LME. Why? Now they had to pay big margin calls on the exchange while receiving no margin from their client. 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. Those payments have now been made, a person familiar with the matter said on Tuesday. Bloomberg News' Joe Deaux reports. call +44 20 3097 8888 support@capital.com. How to Geta Free Flight to Hong Kong in 500,000 Airline Ticket Giveaway, Apple Suppliers Are Racing to Exit China, AirPods Maker Says, Stocks, Bonds Drop as Traders Weigh Data, Fedspeak: Markets Wrap, Microsoft Expands Game Pass as Regulators Fret Over Activision Deal, Cash Is Paying More Than Traditional Stock-Bond Portfolio. Tsingshan has been struggling to pay margin calls to its brokers, according to people familiar with the situation. 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. The big fear was that Tsingshan would struggle to make margin calls with its bankers, potentially facing billions of dollars in losses. Short-covering trades made last week by the Chinese billionaire contributed to a swift, huge surge. Mampukan Tsingshan bertahan? The most comprehensive solution to manage all your complex and ever-expanding tax and compliance needs. articles a month for anyone to read, even non-subscribers! At 8:15 a.m., the screens stopped flashing, hours before the in-person pit trading session was even set to begin. Reuters provides business, financial, national and international news to professionals via desktop terminals, the world's media organizations, industry events and directly to consumers. Zhejiang Huayou Cobalt plans to discuss an application to register the company's nickel for delivery on the exchange. Just after 6 a.m., the price of nickel passed US$100,000 a ton. Yet the day before, the market had started to unravel, with prices rising by astunning66 per cent to US$48,078. Tsingshan's difficulties in paying its margin calls, and the company's ongoing bailout negotiations, have put its banks and brokers in a bind, as they have had to make hefty margin calls of their own at the LME to cover their short positions on the exchange. For Xiangs big short position, that was painful. 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. Four or five of the brokerages that are LME members would have failed, a shock that could have devastated the global metals industry. The move is a characteristic display of self-confidence from Xiang Guangda, the owner of Tsingshan Holding Group Co., and means that the nickel market could be set for more fireworks once it reopens. 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. 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. As of the evening of March 13, the LME had yet to announce a date for nickel trading to resume. Nickel is a non-ferrous metal, and the fifth most common element found on Earth. a practice known in financial markets as margin calls. Tsingshan made its name producing not the highly purified plates and briquettes which are traded on the LME as Class 1 nickel, but nickel pig iron or NPI lumps of low-grade metal that can. Some have also warned that much of the chaos in the nickel market may not be over yet. NIC's operations and cash flow remained stable in 2022 despite Tsingshan's significant loss on its nickel short position in March 2022. Tsingshan Holding Group held the biggest short position for nickel on the LME. .css-16c7pto-SnippetSignInLink{-webkit-text-decoration:underline;text-decoration:underline;cursor:pointer;}Sign In, Copyright 2023 Dow Jones & Company, Inc. All Rights Reserved, Final Early Bird Pricing! 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. 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. 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. But to hedge against a a drop in prices, they use. 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. See here for a complete list of exchanges and delays. 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. It granted extra time on March 7th to CCBI Global, a Chinese broker for Tsingshan that is a member of the LME, to raise funds from its state-owned parent, China Construction Bank, to cover. Xiang wanted to increase Tsingshans production dramatically by producing so-callednickel matte. It's been under growing pressure to meet the payments in recent days, the. 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. The price continued to climb higher as one of the world's largest nickel producers, Russia decided to invade Ukraine. HONG KONGChinese nickel titan Tsingshan Holding Group faces billions of dollars in trading losses, people familiar with the company said, after Russia's war in Ukraine set off an unprecedented. As with similar short squeezes of the past, such as those involving GameStop and Volkswagen, a short squeeze occurs when a market participant borrows a certain volume of a security and sells it, hoping that its price will fall. Creditors and banks who acted for Tsingshan were demanding margin settlements and the closing of all positions. For a while, it wasunclear which view of the market would prevail. 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. Prices for the metal, used in stainless steel and electric vehicle batteries, were last in that range in December. By early this year, it had taken ownership of more than half of the available nickel in LME warehouses. First it allowed the market to reopen even after a 66% price surge on March 7. The frenzied move the largest-ever on the LME came as investors and industrial users who had sold the metal scrambled to buy the contracts back after prices initially rallied on concerns . Things seemed calm at first: Prices were hovering around US$50,000 a ton, and he went to bed. Capital Com Online Investments Ltd is a limited liability company with company number 209236B. Traders must deposit cash, known as margin, with their brokers on a regular basis to cover potential losses on their positions. But its obligations dwarfed its available cash and bank credit. 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. It also doesn't create waste and may help fight the climate crisis. Now, the traders watched with a mixture of horror and grim fascination as the price went vertical. While Mark Thompson, executive vice-chairman at mining-development company Tungsten West, tweeted: The LME is now very likely going to die a slow, self-inflicted death through the loss of confidence in it and its products.. The war in Ukraine surprised the market and led to a price surge, pushing Tsingshans margin to billions as it rose in-line with nickel prices. In an earlier interview with Chinese news outlet Yicai, Xiang blamed "foreigners making some moves" for nickel's price spike. And it was already heading higher once more in February prior to the outbreak of war in Eastern Europe, partly on renewed interest in the metal as the global economy continued its recovery from the COVID-19 crisis as well as buoyant demand for electric vehicle batteries, of which nickel is a principal component. As such, if Tsingshan can weather the losses on its LME positions, the higher prices could yet benefit its core business of producing nickel and stainless steel. Mr Xiang began building the short position in part because he wanted to hedge rising output, but also because he believed the rally in nickel prices would fade this year. Xiang Guangda in 2017. President Tayyip Erdogan indicated on Wednesday that elections will be held on May 14, sticking to his previous plan for the vote with a date just over three months after a devastating earthquake killed more than 45,000 people in Turkey. Creditors and banks who acted for Tsingshan were demanding margin settlements and the closing of all positions. How to Geta Free Flight to Hong Kong in 500,000 Airline Ticket Giveaway, Apple Suppliers Are Racing to Exit China, AirPods Maker Says, Stocks, Bonds Drop as Traders Weigh Data, Fedspeak: Markets Wrap, Microsoft Expands Game Pass as Regulators Fret Over Activision Deal, Cash Is Paying More Than Traditional Stock-Bond Portfolio. Capital Com Online Investments Ltd is a Company registered in the Commonwealth of The Bahamas and authorised by the Securities Commission of The Bahamas with license number SIA-F245. A week earlier, nickel was trading around $25,000 and the price of the metal has more than quadrupled in a matter of days. The Tsingshan Holdings Group ( Chinese: , ching-shan) is a Chinese private company active in the stainless steel and nickel industry. But recent events have certainly injected a dose of volatility into the market. 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. 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 . 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Assessing the Incremental Costs of Regulation and Supervision Faced by Next-Gen Operating Models for Bankers and Advisors, Macroprudential Policy and Real Estate Funds. Then in . Join the 500.000+ traders worldwide that chose to trade with Capital.com, Also you can contact us: Some hedge funds were buying nickel contracts in a bet on the electric vehicle boom. Our Standards: The Thomson Reuters Trust Principles. LME brokers and their clients were hit with margin call after margin call. Nickel prices doubled on Tuesday and briefly rose above a record $100,000 a tonne as banks and brokers rushed to close part of a huge position amassed by Xiang Guangda, the billionaire founder of. Comparable-store sales rose 19.3% in fiscal 2020 and grew another 14.4% year over year in the first nine months of 2021. 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 . 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 . Several large brokers got margin calls of close to US$1 billion each over the course of the day. For the fourth quarter, the company expects to generate "high single-digit. And once again, this short squeeze racked up billions in losses for those involved. Trimegah menilai bisa. Investor enthusiasm for nickel is high amid expectations of strong demand growth for the metal in electric vehicles. Tsingshan's difficulties in paying its margin calls, and the company's ongoing bailout negotiations, have put its banks and brokers in a bind, as they have had to make hefty margin calls of their own at the LME to cover their short positions on the exchange.
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