Its also one of the most important raw materials needed inmaking batteriesfor electric vehicles. Reuters provides business, financial, national and international news to professionals via desktop terminals, the world's media organizations, industry events and directly to consumers. Nickel prices shot up as much as 250% in two days on the LME at the start of this week. 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. 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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%. 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. The price continued to climb higher as one of the world's largest nickel producers, Russia decided to invade Ukraine. But to hedge against a a drop in prices, they use. As the price rose through the London day after offices in Asia had closed, Tsingshan started struggling to pay, the people say. The Companys registered office is at Bahamas Financial Centre, 3rd Floor, Shirley and Charlotte Street, P.O. 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. LME brokers and their clients were hit with margin call after margin call. Those payments have now been made, a person familiar with the matter said on Tuesday. Weve received a lot of phone calls today, he 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. And that was just for the portion of the short position it held directly on the exchangeabout 30,000 tons. 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. 3.1 What is the margin call to Tsingshan? But its extremely unusual for an exchange to cancel whole sessions of trading after the fact. Just after 6 a.m., the price of nickel passed US$100,000 a ton. Comparable-store sales rose 19.3% in fiscal 2020 and grew another 14.4% year over year in the first nine months of 2021. 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.. 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. Jack Farchy, Alfred Cang and Mark Burton, Bloomberg News. People forgot that this isnt a video game retailer; its an important physical commodity.. 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. Why? It was 5:42 a.m. on March 8 in London when the nickel market broke. The fallout was immediate. Nickel short interest was created by Tsingshan. 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. The arrangement will also help the pave the way for the London Metal Exchange to restart nickel trading, they said. a practice known in financial markets as margin calls. Neither party seems very keen on this idea, however. For Xiangs big short position, that was painful. Based on the close on Friday night at $29,130, the LME were raising initial margins to a prudent 7.72% of the contract value. Tsingshan is also NIC's majority shareholder with a 21.15% stake through Shanghai Decent Investment. Assessing the Incremental Costs of Regulation and Supervision Faced by Next-Gen Operating Models for Bankers and Advisors, Macroprudential Policy and Real Estate Funds. Short-covering trades made last week by the Chinese billionaire contributed to a swift, huge surge. Tsingshan was unable meet margin calls and only avoided bankruptcy after . Tsingshan's difficulties paying its margin calls have put its . 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. That put Tsingshans banks and brokers, which include JPMorgan Chase, BNP Paribas, and Standard Chartered,in a bind. 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Advertise | Careers | Editorial Guidelines | . 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. Xiang didnt believe the rally would last. Erin Jonasson. Late Tuesday, the exchange said it anticipates trading wont resume before Friday. The majority of retail investor accounts lose money when trading CFDs. The unprecedented rally prompted the 145-year-old exchange to suspend nickel trading Tuesday. Now, people familiar with the matter say, the exchange is likely to introduce such measures as position limits and greater transparency. Xiang Guangda, who controls the worlds largest nickel producer, Tsingshan Holding, and is known as Big Shot in Chinese commodity circles, has closed out part of his companys short position and is considering whether to exit the wager altogether, the people said. Capital Com is an execution-only service provider. In late February and early March, Tsingshan, which had sales of 352 billion yuan (US$56 billion) last year, paid its margin calls on time. read more. Nickel trading resumed on 16 March 2022. 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. Tsingshan thus desperately scrambled to buy nickel to cover its short position, which only added further upward pressure on prices. 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 LME did not put it into default, instead giving it more time to pay. 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. This market frenzy all came to a head on March 8, when the LMEhaving allowed nickel prices to surge by around 250 percent in just a couple of days and reach an all-time high of $101,365/metric tonne (mt) in intra-day trading, which was more than double the $48,078/mt at which it closed the previous daysuspended all trading of nickel. Help using this website - Accessibility statement. The LME at the end of the day is a physical metal market, he says. 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. 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 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. https://www.wsj.com/articles/nickel-market-crisis-sends-london-metal-exchange-scrambling-to-prevent-damage-11646858558. This is lower than Nickel Mines' expected profit margin for nickel in matte at current prices. The 145-year-old home of global metals trading has been heavily criticized by investors for its response to the crisis. Access unmatched financial data, news and content in a highly-customised workflow experience on desktop, web and mobile. Then in . Chinese nickel giant Tsingshan's hedge backfired Commodities companies of course generally benefit from higher prices for their products. Forbes places Xiang's real-time net worth at $1.2 billion. Reuters, the news and media division of Thomson Reuters, is the worlds largest multimedia news provider, reaching billions of people worldwide every day. Assessing the Incremental Costs of Regulation and Supervision Faced by EU Banks Compared to Their US Peers, Interview with Mr. lvaro Saboro, Chief Executive Officer, Grupo Financiero BCT. Tsingshan has been struggling to pay margin calls to its brokers, according to people familiar with the situation. 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. 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. The XM Research Desk, manned by market expert professionals, provides live daily updates on all the major events of the global markets in the form of market reviews, forex news, technical analysis, investment topics, daily outlook and daily vidoes. At the current price of nickel, the brokers themselves wouldnt be able to pay their margin calls, they told the LME. If nickel prices stay lofty it could complicate the energy transition with electric vehicle batteries costing more to produce. It is up nearly 400% so far this year. The LME made a near-unprecedented decision. read more. Nickel rocketed to a record high above $US100,000 a tonne on Tuesday, driven in part by Tsingshan and its brokers activity, before trading was suspended. Nickel prices usually move a few hundred dollars per ton in a day. 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. He started increasing his short position on the London Metal Exchange. All quotes delayed a minimum of 15 minutes. This copy is for your personal, non-commercial use only. Keep in mind that past performance is no guarantee of future returns. Xiang wanted to increase Tsingshans production dramatically by producing so-callednickel matte. Bloomberg: Balance of Power focuses on the politics and policies being shaped by the agenda of President Biden's administration. Bloomberg News' Joe Deaux reports. Are you considering whether or not to trade nickel or want to learn more about the market? 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. It could be even larger than that when positions taken through intermediaries are taken into account, people separately said. 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. Reuters provides business, financial, national and international news to professionals via desktop terminals, the world's media organizations, industry events and directly to consumers. 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