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. Please try again later. 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. 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. Leeuwin managing director Chris Piggott was a senior geologist at ASX-listed Bellevue when it defined its core discoveries, and was part of the team that defined the greenfields Nova-Bollinger. Those past scandals forced reforms on the exchange. We had a frenzy based on speculation that accelerated on Monday and Tuesday. . At 1 a.m. on Tuesday, the market opened. For participants in commodities exchanges, a price rally is not necessarily good news. Xiang isnt just a financial trader making paper bets on price moves. Required fields are marked *. At the current price of nickel, the brokers themselves wouldnt be able to pay their margin calls, they told the LME. 92 132 MT. Glencore is a leading producer and marketer of nickel, as well as a recycler of nickel-containing materials such as batteries. It was a classic short squeeze, as the pain for Tsingshan, its brokers, and other shorts created a self-reinforcing cycle. As the trend towards e-mobility grows, this versatile metal is increasingly needed to produce high-performance batteries. Glencore's Koniambo mine is located in New Caledonia, mining nickel in this French territory in the South Pacific. But its obligations dwarfed its available cash and bank credit. The company has assured creditor banks in China that its . Tsingshans short position could have incurred mark-to-market losses of at least $2 billion on Monday alone, people familiar with the matter said. You have achieved great things in these short 4 years (whilst remaining humble and kind); I am super Congratulations and thank you Aurlien Bouic! Mid Term. However, reports that Beijing is mulling a rescue deal for Tsingshan Holding Group , the company behind nickel's big short . 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. The latest price was A$0.04 (25-minute delay). Despite the recent upheaval, his company still remains the biggest in the nickel industry. The nickel market was anything but calm. Nickel prices usually move a few hundred dollars per ton in a day. , Mar 23, 2022. Others took to social media. 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. In terms of revenue, the global largest two companies occupy a share . When Norilsk Nickel left the Western markets, Glencore became its main substitute for nonferrous metals. Glencore plc is a Swiss multinational commodity trading and mining company with headquarters in Baar, Switzerland. Report summary. Already at an all-time high by 5.42am, it lurched higher in leaps, soaring $US30,000 in a matter of minutes. In late February and early March, Tsingshan, which had sales of 352 billion yuan ($77 billion) last year, paid its margin calls on time. It was 5:42 a.m. on March 8 in London when the nickel market broke. He was awakened by a phone call at 5:30 a.m. Our positions and operations dont have any problems, Xiang Guangda, who is also the Wenshou-based companys founder, told Yicai Global yesterday. The LME convened its special committee, a small group of metals and legal experts with the power to issue emergency rules for the market. UNFORGIVEABLE,tweetedMark Thompson, a former trader at Trafigura and Apollo. Even at that level, clients of LME brokers had failed to pay some $US500 million of margin calls in relation to their short positions on the exchange, says a person familiar with the matter. 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 . Trafigura Group sold cargoes of nickel it now believes may not have contained any of the metal to buyers including a US trade finance firm and a state-owned Jack Farchy on LinkedIn: Trafigura's Non-Existent Nickel Was Bought by a US Firm Now, people familiar with the matter say, the exchange is likely to introduce such measures as position limits and greater transparency. The LME is now very likely going to die a slow, self-inflicted death through the loss of confidence in it and its products, predicted Thompson in a tweet. Miners, traders, and manufacturers often use the market to make short betsthat is, to make money when prices fall. Miners, traders, and manufacturers often use the market to make short bets that is, to make money when prices fall. But Xiang must now decide what to do with those positions, which give him outsize influence on the price of a metal used in everything from electric-vehicle batteries to stainless-steel kitchen appliances. Finance > Capital-markets. Now, the traders watched with a mixture of horror and grim fascination as the price went vertical. Were working to restore it. Chinese entrepreneur Xiang Guangda has been caught out by nickels price surge. You will be able to view the post at https://dtmagazine.com/money724-302022.php#wrap in the Precious Metals section. . The head of one London metals brokerage recalls feeling sick as he watched the moves, realising what the spike in prices would mean for his company, the market, and the global metals industry. Xiangs short position has now racked upbillions of dollars in losses. Tsingshan Group is the partner of Huayou that develops the nickel project. 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. I'll discuss why. Its unclear whether he will get his way. 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. Some aggrieved traders are already preparing to take legal action against the exchange. By now, Tsingshan wasnt the only nickel company that was strugglingjust the biggest. 5 000 MT. Why bet against nickel when you have a nickel business? Provided short/mid/long/strategic schedules using Deswik. Matthew Chamberlain, the LMEs chief executive officer, had stayed up to watch. 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. Formerly called Companhia Vale do Rio Doce, Vale is a diversified multinational metals and mining company founded in 1942, and headquartered in Rio de Janeiro, Brazil. Evaporating liquidity. The LME made a near-unprecedented decision. Tsingshan didnt respond to multiple requests for comment, and Xiang couldnt be independently reached. Not everyone shared his pessimism about prices. Login. Despite the recent upheaval, his company still remains the biggest in the nickel industry. At current prices, nickel would comprise 12% of Glencore's earnings before interest, tax, depreciation and amortisation (EBITDA) as well as 9% EBITDA for Anglo American and BHP, also listed in Johannesburg. The difference is that nickel is a commodity that touches the entire global economy. But while the short squeeze has weighed on Tsingshans short-term cash flows, strong nickel prices are to its advantage in the long run. 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. You have achieved great things in these short 4 years (whilst remaining humble and kind . In theory, any price changes on the futures market should offset price changes in the value of the inventoriesas long as the traders canmeet their margin calls. Bloomberg. 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. 20 kt/a nickel in concentrate) and Fraser Morgan (ca. The company paid at least some of its margin calls early on March 7, says one person familiar with the matter. A market that many veterans simply describe as "broken." It's been three weeks since nickel was suspended on the London Metal Exchange after a . Glencore Nikkelverk AS has a modern and complex processing system. Company says it puts it into the league of the largest undeveloped nickel deposits in the world. While Russias nickel exports havent been targeted by sanctions, U.S. and European buyers have nonetheless sought alternatives to Russian sources. Others in the market may also push up prices anticipating that short covering. Tsingshans nickel doesnt match the grade used in settlement on the LME, so the contracts arent a perfect hedge. 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. 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. WATCH: The Chinese tycoon, known as Big Shot in commodities circles is said to be facing billions of losses. Tsingshan is an excellent Chinese enterprise.. Born in 1958, Xiang founded his business more than 30 years ago as a workshop making frames for car doors and windows in Wenzhou, eastern China. Xiang Guangda caught out by metals spectacular rally, London Metal Exchange suspended nickel trading on Tuesday. Anglo, which produced 59.3 million tonnes of iron ore last year, aims to halve its Scope 3 indirect emissions by 2040. Nickel in electric vehicle batteries helps deliver higher energy density and longer range for vehicles. Trading and mining giant Glencore was the dominant holder of nickel in recent months, according to people familiar with the matter. INF News.com. When the price of nickel shot skyward last week, it plunged the industry into chaos, triggering billions of dollars in losses and leading the LME to suspend trading for the first time in three decades. 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. While few observers believed Xiang could reach that level of production, he was confident. 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. Its still unclear how much of a risk the nickel rally and a cash drain from topping up margin payments pose to the company. Some market rumors are circulating that Glencore might squeeze Tsingshan on LME Nickel for its 60% stake in a nickel mine in Indonesia. Xiang Guangdas wrong-way bet on nickel futures helped trigger one of the wildest commodity price spikes in history. LME brokers and their clients were hit with margin call after margin call. Mark Hansen, chief executive officer of Concord Resources. 4 354 . Our fundamental responsibility is market stability, he told Bloomberg TV. Back Submit. . Tsingshan is in touch with relevant parties and has the support of Chinese government departments and leaders, he added. Xiang himself had little interest in international news, the people said, and the growing speculation over a possible war was hard to track in China. Its not clear to what extent Xiang saw his position as merely a hedge or as a speculative bet. 92 000 MT. The difference is that nickel is a commodity that touches the entire global economy. It was a classic short squeeze, as the pain for Tsingshan, its brokers, and other shorts created a self-reinforcing cycle. Those 18 minutes will haunt me, says the executive, who wasnt authorized to speak publicly. Glencore's disclosure follows a forecast earlier this month that there needs to be greater investment in nickel production, even though the short-term picture suggests there will be a glut of the metal. The price was frozen, below the record high but still at $80,000 a ton. The world's top five nickel-producing companies. Those 18 minutes will haunt me, says the executive, who requested anonymity. 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. 389 8 Comments. The prices that were being seen during that Asian session were becoming disconnected from, I believe, physical reality.. 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. Tsingshan Holding Group was looking at an $8 billion trading loss after nickel prices soared, The Wall Street Journal reported Tuesday . But while the short squeeze has weighed on Tsingshan's . At that time of day, bleary-eyed traders are typically just glancing at prices as they swig coffee on their way to the office. 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. LME brokers and their clients were hit with margin call after margin call. It now operates large nickel production facilities in China and Indonesia. Nickels price moved sharply higher in the week after Russias military invasion. They held a hurried call on Monday evening, but decided to allow the nickel market to continue trading. Major international companies like BHP Group Ltd. and Rio Tinto Plc hedge against currencies, commodity prices and interest rates on an as required basis. Investors who had booked trades during the chaotic session in the early hours of Tuesdaywere furious. The metal is found in all our homes as a key ingredient of stainless steel. Including positions on the London Metal Exchange and bilateral bets with banks, Xiang still has short holdings in the region of 150,000 tonnes, the people said. Our nickel operations are in Canada, Australia, Norway, and New . Our marketing business markets nickel and nickel concentrates, as well as by-products and ferronickel. Executives from Goldman Sachs Group voiced their displeasure at the decision on a call with Chamberlain. 2017 - 2018 Yicai Global, Yicai Media Group. Traders and brokers on the open outcry pit at the London Metal Exchange. 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. Furious investors and traders. Their GLEN share price forecasts range from GBX 540 to GBX 740. The Chinese government may also play a role. But the obvious consequence of so much nickel hitting the market, he believed, would be a fall in its price. Yet the day before, the market had started to unravel . Still, the LME has weathered numerous scandals before in its 145-year history, from a 1985 crisis in the tin market that caused many brokers to go out of business to the incident when a trader at Sumitomo hid more than $US2 billion in losses. Cobalt. Born in 1958, Xiang founded his business more than 30 years ago as a workshop making frames for car doors and windows in Wenzhou, eastern China. 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In the short term, a package of loans from Chinese and international banks will help Tsingshan meet its immediate liquidity squeeze. 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. Nickel makes steel corrosion-resistant and plays an essential role in our modern world. The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Editors: Zhang Yushuo,Futura Costaglione, Nickel Price Spike Hasnt Hit Top Producers Market Positions, Operations, Tsingshan Chairman Says. To date, the company has sold a tonne of nickel for an average of $ 18,474. Xiang Guangda, the billionaire owner of Tsingshan Holding Group. 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. The company had plans to produce 850,000 tons of nickel in 2022, an increase of 40% in a year, according to a person briefed on them. Sign up to get it every weekday morning. . Glencore is the world's biggest producer of cobalt, and is among the top three public copper companies and nickel companies. Murrin Murrin is a nickel-cobalt operation in the north-eastern Goldfields of Western Australia, producing refined nickel and cobalt metal. Its not just a casino.. 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. Then, as now, a key factor was the intervention of the exchange. Glencore will give almost 6bn to shareholders after the mining and commodities company reported record pre-tax profits of more than 28bn in 2022 . The two major mining companies in Sudbury are working together to . The LMEs special committee held another call at about 6 a.m. Now they recognized that they had tosuspend trading. The LME convened its special committee, a small group of metals and legal experts with the power to issue emergency rules for the market. 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. Required fields are marked *. Remember, when prices move up, traders such as Xiang who have sold futures contracts face margin calls; they must put up more cash to cover potential losses. Tsingshan accounted for about half that amount. 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. People familiar with the discussions said the exchange would ideally prefer to wait until Xiang has reached a resolution with his banks and brokers. The dollar hit a one-week low earlier Wednesday after China's yuan gained. Ore is processed at the Strathcona mill. Once its industrial complex reaches peak p. Crucially, the decision meant traders wouldnt need to pay margin calls on the basis of the $80,000 nickel price. 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. Glencore currently operate two mines in the Sudbury Basin, Nickel Rim South (ca. Xstrata Nickel Montcalm Mine 2007 - 2010 3 years. Four or five of the brokerages that are LME members would have failed, a shock that could have devastated the global metals industry. He draws a comparison with Silver Thursday, the day in 1980 when an attempt by the Hunt brothers to corner the silver market came unstuck. 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. Now they had to pay big margin calls on the exchange while receiving no margin from their client. 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. It traded briefly above $100,000 a ton early on Tuesday. If you don't see the email, check your junk, spam or other folders. Nickel. Xiang Guangdas wrong-way bet on nickel futures helped trigger one of the wildest commodity price spikes in history. Xiangs short position has now racked up billions of dollars in losses. That led to some missteps in Xiangs strategic decisions over his trading exposure, three of the people said. He draws a comparison with Silver Thursday, the day in 1980 when an attempt bythe Hunt brothersto corner the silver market came unstuck. Executives from Goldman Sachs Group voiced their displeasure at the London metal exchange and complex processing system still... Their margin calls, they told the LME one of the wildest commodity price spikes in history to high-performance... Recent months, according to people familiar with the matter a hurried call Monday. Earlier Wednesday after China 's yuan gained their clients were hit with margin call after margin call after margin after... Early on March 8 in London when the nickel market to make short betsthat is, make. 540 to GBX 740 to produce high-performance batteries you do n't see the email, your! 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