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. Today, in addition to its electronic market, its one of the last exchanges where brokers still gather in person to yell orders at one another for part of the day. Undeterred, the Chinese tycoon has told banks he wants tomaintain his position, and has asked them to keep funding him despite the losses. , Mar 23, 2022. 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 . Some aggrieved traders are already preparing to take legal action against the exchange. Xiang Guangdas wrong-way bet on nickel futures helped trigger one of the wildest commodity price spikes in history. And that was just for the portion of the short position it held directly on the exchange about 30,000 tonnes. 6W - 9M. The nickel market was anything but calm. 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. Others took to social media. Now the Chinese tycoon known as Big Shot must decide whether to unwind a wager that risks fueling more dramatic swings in one of the worlds most prized metals. Report this profile Report Report. The LMEs special committee held another call at about 6 a.m. Now they recognized that they had tosuspend trading. For Xiangs big short position, that was painful. Soon Chamberlain and other executives at the exchange began receiving frantic phone calls from LME brokers. In turn, the extraction of precious metals by the company in 2021, i.e. But much of Chinas academic and business community did not believeRussia would attackits neighbor. 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 week's unprecedented price spike, according to people . . When prices rose above $US20,000 he would consider shorting nickel, the people said, because his production costs in Indonesia were as low as $US10,000 a tonne. But while the short squeeze has weighed on Tsingshan's . . Despite the recent upheaval, his company still remains the biggest in the nickel industry. Since 1910, nickel and other metals have been refined, produced and exported from the production plant in Kristiansand. Mid Term. Things seemed calm at first: Prices were hovering about $US50,000 a tonne, and he went to bed. Its not clear to what extent Xiang saw his position as merely a hedge or as a speculative bet. And once again, this short squeeze racked up billions in losses for those involved. Wayne has over 20 years of operational management experience of complex hydrometallurgical plants, specialising in transformation of operational and . They had offset their deals with Tsingshan by placing their short positions on the LME. It traded briefly above $100,000 a ton early on Tuesday. The LMEs special committee held another call at about 6am. The annals of commodity markets are full of tales of producers and traders, from Metallgesellschaft to Sumitomo, that blurred the lines between hedging and speculation and ended with billions of dollars in losses. Major international companies like BHP Group Ltd. and Rio Tinto Plc hedge against currencies, commodity prices and interest rates on an as required basis. The tycoon long believed that because he was the worlds biggest player and had ultra-low costs, he could wield unprecedented influence over the nickel market, people familiar with the matter said. The LME convened its special committee, a small group of metals and legal experts with the power to issue emergency rules for the market. Xiangs short position has now racked up billions of dollars in losses. Overseas market players have made some moves, Xiang said, driving up nickel prices in the last two days. You will be able to view the post at https://dtmagazine.com/money724-302022.php#wrap in the Precious Metals section. Follow the topics, people and companies that matter to you. It also highlights the risks of an opaque market where a handful of players play outsized roles, deciding how and where purchasers like global battery makers secure raw materials. Glencore Chief Executive Officer, Gary Nagle: "Overall production was mixed period-over-period (5 commodities up and 5 down in the table below), reflecting the Ernest Henry (copper/gold) and Bolivia (zinc) portfolio disposals, and geotechnical and processing challenges at Katanga, offset by improved cobalt, nickel and ferrochrome production levels and the . Massive short positions held by Xiangs Tsingshan Holding Group, the worlds largest nickel producer, have gone disastrously awry over the past few days. In theory, there should be two options for this 200,000 tons of nickel short order: 1. Executives fromGoldman Sachs Group Inc.voiced their displeasure at the decision on a call with Chamberlain. The prices that were being seen during that Asian session were becoming disconnected from, I believe, physical reality.. 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. Nickel prices surged to an all-time high on Tuesday, up roughly 250% in just two days, and forcing the London Metal Exchange to close trading. Including positions on the London Metal Exchange and bilateral bets with banks, Xiang still has short holdings in the region of 150,000 tons, the people said. In terms of revenue, the global largest two companies occupy a share . Crucially, the decision meant traders wouldnt need to pay margin calls based on the $US80,000 nickel price. Tsingshans nickel doesnt match the grade used in settlement on the LME, so the contracts arent a perfect hedge. Feb 2021 - Dec 202111 months. Glencore-backed Leeuwin ready to set sail. Its unclear whether he will get his way. At that time of day, bleary-eyed traders are typically just glancing at prices as they swig coffee on their way to the office. WATCH: The Chinese tycoon, known as Big Shot in commodities circles is said to be facing billions of losses. By now, the entire nickel industry was in crisis. gold and silver, amounted to 809 and 31 516 tons, respectively. Now they had to pay big margin calls on the exchange while receiving no margin from their client. It was 5:42 a.m. on March 8 in London when the nickel market broke. We're taking you for a deep dive into the world of copper - a versatile metal and important component for a low-carbon future. Our fundamental responsibility is market stability, he told Bloomberg TV. Executives at Tower Research Capital, one of Wall Streets oldest electronic market-makers, reined in its trading activity on the LME and put its membership in the exchange under review. Then, as now, a key factor was the intervention of the exchange. But the obvious consequence of so much nickel hitting the market, he believed, would be a fall in its price. For a while, it wasunclear which view of the market would prevail. 115 000 MT. As Contract Writer / Coordinator, you will be part of the Contract Team, which is a team within the Coal Department. Nickel is also used in certain types of steel which lower magnetic properties. In the short term, apackage of loansfrom Chinese and international banks will help Tsingshan meet its immediate liquidity squeeze. The LME at the end of the day is a physical metal market, he says. Its participants are a mix of the industrial metals companies, which tap the market to offset their price risks, and hedge funds, which use it to speculate. For the LME to cancel nickel trades between willing buyers and sellers is unforgivable. At 1am on March 8, the market opened. 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. Save my name, email, and website in this browser for the next time I comment. Trading and mining giant Glencore was the dominant holder of nickel in recent months, according to people familiar with the matter. I'll discuss why. In late February and early March, Tsingshan, which had sales of 352 billion yuan ($56 billion) last year, paid its margin calls on time. Login. Investors who had booked trades during the chaotic session in the early hours of Tuesdaywere furious. 2W - 6W. 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. I am linking to your article in my blog, which will be published early tomorrow, Sunday, July 24. 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. Exchanges sometimes cancel trades when technology glitches or fat fingers cause one-off mistakes. Nickel. Then on March 7, nickels price began its parabolic ascent, surging from $30,000 a ton to more than $50,000. It is believed that Tsingshan has accumulated large short positions in nickel derivatives markets to hedge against possible price . For participants in commodities exchanges, a price rally is not necessarily good news. It decided to cancel all the trades that took place on Tuesday morning$3.9 billion of them, according to a Bloomberg calculation. 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. . On this day, however, metal traders were glued to a screen, watching the price action on the electronic market, which was already open to accommodate Asian trading. The price move on March 8 created a systemic risk to the market, the LME said two days later. Yet the day before, the market had started to unravel . Inability to deliver the products was a big problem for Tsingshan, the analyst added, noting that the company has nickel iron, stainless steel, and nickel matte but noelectrolytic nickel, which is the type traded on the LME. 92 000 MT. From a contractual perspective, you may be . Glencore. The annals of commodity markets are full of tales of producers and traders, fromMetallgesellschafttoSumitomo, that blurred the lines between hedging and speculation and ended with billions of dollars in losses. Born in 1958, he started out making frames for car doors and windows in Wenzhou, in eastern China. Enter the code below to reset your password. This was the most disorderly move in a metal Ive seen in my career, says Mark Hansen, CEO of trading house Concord Resources. Four or five of the brokerages that are LME members would have failed, a shock that could have devastated the global metals industry. Your email address will not be published. Nickels price moved sharply higher in the week after Russias military invasion. Nickel prices usually move a few hundred dollars per ton in a day. The Murrin Murrin Mine is a major nickel-cobalt mining operation being conducted in the North Eastern Goldfields, approximately 45 km east of Leonora, Western Australia.The project was initiated as a joint venture between Murrin Murrin Holdings Pty Ltd, a wholly owned subsidiary of Anaconda Nickel Limited (whose share was 60%) and Glenmurrin Pty Ltd, a wholly owned subsidiary of Glencore . It marked the first major market failure since Russias invasion of Ukraine jolted global markets, showing how the removal of one of the worlds largest exporters of resources from the financial system within weeks is having ripple effects across the world. Live from Dubai, connecting Asian markets to the European opens. Nickel prices had been rising for weeks, amid fears that supplies from Russia the largest exporter of refined nickel would be disrupted if the countryinvaded Ukraine. Vale - 208,000 metric tonnes. 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Sign up to get it every weekday morning. Then on March 7, nickels price began its parabolic ascent, surging from $US30,000 a tonne to more than $US50,000. Anyone using the LME needs to understand that. At that time of day, bleary-eyed traders are typically just glancing at prices as they swig coffee . Now, people familiar with the matter say, the exchange is likely to introduce such measures as position limits and greater transparency. Were working to restore it. Already at an all-time high by 5:42 a.m., it lurched higher in stomach-churning leaps, soaring $30,000 in a matter of minutes. The LME canceled transactions and suspended trading Tuesday after nickel's price jumped 90% to $55,000 per metric ton Monday, and then leapt again to a record high of $100,000 the next day . The nickel market was anything but calm. Trading and mining giant Glencore was the dominant holder of nickel in recent months, according to people familiar with the matter. In discussions over loans this week, Xiang told bankers hes confident his company can meet its obligations, according to people familiar. Worse, the chaos was spreading to other markets: Zinc prices spiked 15% in a few minutes to a record high, only to collapse again. . Glencore Nikkelverk is an important part of the green shift. As the price rose through the London day after offices in Asia had closed, Tsingshan started struggling to pay, the people say. Vale is the world's largest producer of nickel, one of the most versatile metals in existence. Vale and Glencore announced today that they've entered a partnership to begin a feasibility study to explore Nickel Rim South. The difference is that nickel is a commodity that touches the entire global economy. Tsingshan is an excellent Chinese enterprise.. Others took to social media. The LME at the end of the day is a physical metal market, he says. . For most of the past decade, theyd traded between $10,000 and $20,000. For participants in commodities exchanges, a price rally is not necessarily good news. 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. Nickel. Related Article: Nickel price spike purely financial but Tsingshan effect could linger. China's manufacturing activity expanded at the fastest pace in more than a decade in February. At 8:15 a.m., the screens stopped flashing, hours before the in-person pit trading session was even set to begin. Pemex Reports $9.4 Billion Loss as AMLO Fails to Revive Output . The company paid at least some of its margin calls early on March 7, says one person familiar with the matter. Executives at Tower Research Capital, one of Wall Streets oldest electronic market-makers, reined in its trading activity on the LME and put its membership in the exchangeunder review. How Xiang got to this point is a story that encompasses Chinas emergence as a global economic behemoth. Then, as now, a key factor was the intervention of the exchange. But today things have reversed, that is, Tsingshan Group has prepared 200,000 . (Bloomberg) -- A Chinese tycoon who built a massive short position in nickel futures is facing billions of dollars in mark-to-market losses after the metal surged more than 170% in two days, according to people familiar with the matter. The Chinese government may also play a role. 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Xiang wanted to increase Tsingshans production dramatically by producing so-callednickel mattefor electric vehicle batteries. It is owned and operated by Glencore Canada Corporation.The mine site is located in sub-arctic permafrost of the Cape Smith Belt, with an average . Anyone using the LME needs to understand that. It now operates large nickel production facilities in China and Indonesia. We had a frenzy based on speculation that accelerated on Monday and Tuesday. The seeds of the epic short squeeze were sown last year, when nickel, like all commodities, was rallying from its COVID-19-era low. Copper. Shanghai's most-traded nickel futures contract . Its still unclear how much of a risk the nickel rally and a cash drain from topping up margin payments pose to the company. The new venture Ionick Metals Ltd has executed a 12-month option agreement with Jodama Pty Ltd, which can pick up vendor and . Yet the day before, the market had started to unravel, with prices rising by astunning66% to $48,078. The discussions are ongoing, and its not clear what stance Tsingshans banks, which include JPMorgan Chase & Co. and China Construction Bank Corp., will take. Tsingshan accounted for about half that amount. The operations also include the Sudbury smelter. 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. He started increasing his short position on the London Metal Exchange. Russia is the worlds third-largest producer of nickel and its largest exporter of refined nickel metalthe type deliverable on the LME. The LME halted trading of the metal yesterday and announced that it is unable to deliver on spot nickel contracts scheduled for March 9. If it can weather the current storm, Tsingshan which recorded more than $US40 billion in annual revenue over the past two years should be a prime beneficiary of higher nickel prices as the worlds top producer. Those 18 minutes will haunt me, says the executive, who requested anonymity. Those past scandals forced reforms on the exchange. Our positions and operations dont have any problems, Xiang Guangda, who is also the Wenshou-based companys founder, told Yicai Global yesterday. Xiangs short position has now racked upbillions of dollars in losses. I see all automakers within a short time creating their own 4680 . Xiang isnt just a financial trader making paper bets on price moves. The fallout was immediate. The total volume mined by Glencore in 2021 fell compared to 2020, in part due to supply chain problems and the closure of some mines. (via NewsDirect) Helix Resources Ltd (ASX:HLX) MD Mike Rosenstreich tells Proactive the company is ready to spin out its nickel and cobalt interests in the prolific Cobar Basin of NSW into a special-purpose vehicle aimed at maximising value for shareholders. Back Submit. People forgot that this isnt a video game retailer; its an important physical commodity.. The company paid at least some of its margin calls early on Monday, according to a person familiar with the matter. . 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. Activity . 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. One of the key Chinese players in last year's nickel short squeeze is preparing to meet London Metal Exchange Chief Executive Matthew Chamberlain in the first face-to-face encounter since the crisis that upended . 39 000 MT. At the time of the LME's trading halt, nickel had gained more than 230% in March. Chinese entrepreneur Xiang Guangda has been caught out by nickels price surge. Tsingshan Holding Group was looking at an $8 billion trading loss after nickel prices soared, The Wall Street Journal reported Tuesday . Today, in addition to its electronic market, its one of the last exchanges where brokers still gather in person to yell orders at one another for part of the day. Copper. Its not just a casino.. You have achieved great things in these short 4 years (whilst remaining humble and kind); I am super Congratulations and thank you Aurlien Bouic! For the LME, the future isunclear. Tsingshan Group is the partner of Huayou that develops the nickel project. The product to deliver with LME nickel contracts is cathode nickel containing at least 99.8 percent nickel, in accordancewiththeAmerican Society for Testing and Materials' specifications. 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, Chamberlain insisted on March 9 that the solvency of the LME itself was never in doubt. . Cliff Asness, founder of AQR 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. (" Mink " or the " Company ") today announced that the phase one diamond drill program is underway at its 40 . Worse, the chaos was spreading to other markets: Zinc prices spiked 15 per cent in a few minutes to a record high, only to collapse again. That put Tsingshans banks and brokers, which include JPMorgan Chase, BNP Paribas, and Standard Chartered, in a bind. The production of Glencore Nikkelverk in 2019. By now, the entire nickel industry was in crisis. 1w. Tsingshan Group placed a short nickel order, and the matter of being shorted by the opponent was brushed off. Glencore UK Ltd, Izimbiwa Coal (Pty) Ltd, Katanga Mining Limited, Kazzinc Ltd., Koniambo Nickel S.A.S., Magdeburg, Mangoola Coal Operations Pty Limited, McArthur River Mining Pty Ltd, Minera . It was a classic short squeeze, as the pain for Tsingshan, its brokers, and other shorts created a self-reinforcing cycle. While Russias nickel exports havent been targeted by sanctions, U.S. and European buyers have nonetheless sought alternatives to Russian sources. Bloomberg Daybreak Middle East. Four or five of the brokerages that are LME members would have failed, a shock that could have devastated the global metals industry. As the price rose through the London day after offices in Asia had closed, Tsingshan started struggling to pay, the people say. . 20 kt/a nickel in concentrate) and Fraser Morgan (ca. 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. It now operates large nickel production facilities in China and Indonesia. Nickel rocketed to a record high above $100,000 a ton on Tuesday, driven in part by Tsingshan and its brokers activity, before trading was suspended. Trafigura Lines Up Russia Aluminum Deal in Challenge to Glencore. The company had plans to produce 850,000 tonnes of nickel in 2022, an increase of 40 per cent in a year, says a person briefed on them. Murrin Murrin is a nickel-cobalt operation in the north-eastern Goldfields of Western Australia, producing refined nickel and cobalt metal. Undeterred, the Chinese tycoon has told banks he wants to maintain his position, and has asked them to keep funding him despite the losses. They held a hurried call on Monday evening, but decided to allow the nickel market to continue trading. Glencore is a leading producer and marketer of nickel, as well as a recycler of nickel-containing materials such as batteries. By now, Tsingshan wasnt the only nickel company that was struggling, just the biggest. 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. Speculation that accelerated on Monday evening, but decided to allow the nickel industry was in crisis in of! 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