2017 - 2018 Yicai Global, Yicai Media Group. Market speculation has it that Tsingshan has a short position of about 200,000 tons of nickel, which it cannot deliver due to a lack of spot product after being assailed and squeezed out by US and European commodity futures giants such as Glencore, China Securities Journal reported yesterday. Glencore is a leading producer and marketer of nickel, as well as a recycler of nickel-containing materials such as batteries. 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. 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. Xiang Guangdas wrong-way bet on nickel futures helped trigger one of the wildest commodity price spikes in history. 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. Were sorry, this feature is currently unavailable. Those 18 minutes will haunt me, says the executive, who wasnt authorized to speak publicly. 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 production of Glencore Nikkelverk in 2019. He blamed foreigners making some moves for nickels price spike in an interview with Chinese news outlet Yicai. 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. We produce some of the world's purest nickel. Xiang didnt believe the rally would last. 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. People forgot that this isnt a video game retailer; its an important physical commodity.. 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. Nickel prices, however, has been moving in an uptrend for a long time. Then came a geopolitical crisis that caught him unawares. 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 . They had offset their deals with Tsingshan by placing their own short positions on the LME. Nickel is mainly used in the production of stainless steel because it improves its strength and resistance to corrosion. Then came a geopolitical crisis that caught him unawares. Sep 2021 - Present1 year 5 months. For Xiangs big short position, that was painful. Its unclear whether he will get his way. He went on to pioneer new methods for producing nickel and stainless steel that upended the markets and made his Tsingshan the worlds largest producer of both. Glencore Mine Raglan Feb 2014 - Mar 2018 4 years 2 months. China imported 3.44 million tonnes of NPI/ferro-nickel in 2020, up by 79.89% year on year, while Indonesia's material imports came to 2.73 million tonnes in 2020, up 99.6% from a year earlier, according to China Customs data. 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. The LME at the end of the day is a physical metal market, he says. For the LME to cancel nickel trades between willing buyers and sellers is unforgiveable. We produce other metals as a by-product of nickel production, including cobalt, copper, precious metals and platinum-group metals. 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. As Russias invasion of Ukraine pushed up prices, short-position holders including Tsingshan scrambled to trimtheir bets. In cobalt, a Chinese state-owned firm is also quite large, but Glencore is still the largest producer of cobalt in the free world. Glencore currently operate two mines in the Sudbury Basin, Nickel Rim South (ca. Hes in the physical nickel business. While Russias nickel exports havent been targeted by sanctions, US and European buyers have nonetheless sought alternatives to Russian sources. Chinese entrepreneur Xiang Guangda has been caught out by nickels price surge. Get in touch with us now. As the price rose through the London day after offices in Asia had closed, Tsingshan started struggling to pay, the people say. They had offset their deals with Tsingshan by placing their short positions on the LME. At that time of day, bleary-eyed traders are typically just glancing at prices as they swig coffee on their way to the office. 21 962. Like Comment Share. #GlencoreCopper #MetalOfTheFuture https://lnkd.in/eEqPmJn9. Iquique Chile Falconbridge . Report summary. Glencore's Koniambo mine is located in New Caledonia, mining nickel in this French territory in the South Pacific. The latest price was A$0.04 (25-minute delay). Explore the latest reports and results, including financial results, production reports and our annual report. Learn how we produce copper and the uses it is put to. . Perhaps what's 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. Trading and mining giant Glencore Plc was the dominant holder of nickel in recent months, according to people familiar with the matter. this week's short squeeze is nonetheless likely to push . Its also one of the most important raw materials needed in making batteries for electric vehicles. The LME convened its special committee, a small group of metals and legal experts with the power to issue emergency rules for the market. The fallout was immediate. China's manufacturing activity expanded at the fastest pace in more than a decade in February. People familiar with the discussions said the exchange would ideally prefer to wait until Xiang has reached a resolution with his banks and brokers. Last modified on Wed 15 Feb 2023 06.23 EST. 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. 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 . Things seemed calm at first: Prices were hovering around $50,000 a ton, and he went to bed. 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. Most analysts sided with Xiang, at least in the medium term, believing that nickel productionled by Tsingshan and its competitors in Indonesiawould outpace demand. Most analysts sided with Xiang, at least in the medium term, believing that nickel production led by Tsingshan and its competitors in Indonesia would outpace demand. . Crucially, the decision meant traders wouldnt need to pay margin calls on the basis of the $80,000 nickel price. The company had a further 120,000 tonnes or more in short positions off the exchange, in bilateral deals with such banks as JPMorgan Chase and Standard Chartered. 4 354 . Xiangs short position has now racked up billions of dollars in losses. https://bbgvod-azure-us-east1-zenko.global.ssl.fastly.net/vod/vod/m/ODg0NDM2Mg/Q2xvdWRfNTgyODY2/3fb888db-fa8e-42e4-b488-726dae69584b_150.mp4, Nickel price spike purely financial but Tsingshan effect could linger, EV Nickels stock soars after announcing enormous maiden mineral resource in Ontario, Iron ore price jumps on China data, bullish steel demand outlook, Copper price rises as Chinas economy shows strong recovery, Gold price hits 1-week high on robust China economic data, Musk tamps down speculation that Tesla will mine lithium, Monumental shift in way junior mining stocks are valued is coming, Advance Lithium in joint venture talks with Mexicos national lithium company, Goldman warns carmakers against buying miners: It always end in tears. Stephen Engle reports. The spike was driven in large part by a short squeeze centred on Chinese tycoon Xiang Guangda, who had amassed a big wager that nickel prices would fall through his company Tsingshan Holding Group. The LMEs special committee held another call at about 6am. But its obligations dwarfed its available cash and bank credit. Most market participants expect nickel prices to come back down once the crisis around Xiangs position has been resolved. People forgot that this isnt a video game retailer; its an important physical commodity.. We produce some of the worlds purest nickel. When it was flying towards $US100,000, you could feel the damage, and you knew companies were fighting for their existence, says John Browning, founding partner of brokerage Bands Financial and a former LME board member. Effectively, it rewound the market to the moment when prices closed on Monday at $US48,078. It was 5.42 am on March 8 in London when the nickel market broke. But today things have reversed, that is, Tsingshan Group has prepared 200,000 . The nickel market was anything but calm. Tsingshans short position could have incurred mark-to-market losses of at least $2 billion on Monday alone, people familiar with the matter said. Glencore Headquarters. Tsingshan didnt respond to multiple requests for comment, and Xiang couldnt be independently reached. 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. Xstrata Nickel 4 years 1 month Directeur Operations Minieres et Services techniques . For participants in commodities exchanges, a price rally is not necessarily good news. But the effects of the short squeeze are likely to be felt in other ways. 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 . Investors who had booked trades during the chaotic session in the early hours of Tuesday were furious. 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. Now, people familiar with the matter say, the exchange is likely to introduce such measures as position limits and greater transparency. And once again, this short squeeze racked up billions in losses for those involved. Nickel prices had been rising for weeks, amid fears that supplies from Russia the largest exporter of refined nickel would be disrupted if the country invaded Ukraine. The investment is part of Ruperts non-brokered private placement for gross proceeds of about $35 million. Those moves sent nickel to a record high of more than $US100,000 ($136,000) a tonne on Tuesday before trading was suspended. 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. Your password has been changed successfully. 115 000 MT. 2023 Glacier Media Group, All Rights Reserved. 5 000 MT. They held a hurried call on Monday evening, but decided to allow the nickel market to continue trading. The world's top five nickel-producing companies. The Nikkelverk Operations. The operations also include the Sudbury smelter. However, reports that Beijing is mulling a rescue deal for Tsingshan Holding Group , the company behind nickel's big short . Just after 6am, the price of nickel passed $US100,000 a tonne. Our fundamental responsibility is market stability, he said. As the price rose through the London day after offices in Asia had closed, Tsingshan started struggling to pay, the people say. Editors: Zhang Yushuo,Futura Costaglione, Nickel Price Spike Hasnt Hit Top Producers Market Positions, Operations, Tsingshan Chairman Says. At 1 a.m. on Tuesday, the market opened. Its not clear to what extent Xiang saw his position as merely a hedge or as a speculative bet. And when those wagers move violently in the opposite direction, they can be hit with huge margin calls, or requests to put down more cash to back their trades. Some aggrieved traders are already preparing to take legal action against the exchange. 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. In the short term, a package of loans from Chinese and international banks will help Tsingshan meet its immediate liquidity squeeze. Russia is the worlds third-largest producer of nickel and its largest exporter of refined nickel metal the type deliverable on the LME. Xiang isnt just a financial trader making paper bets on price moves. Provided short/mid/long/strategic schedules using Deswik. However, Xiang believed the risks to be manageable, the people said, even as an unidentified nickel stockpiler controlled at least half of the inventories on the exchange. For the LME, the future isunclear. Tsingshans were even larger, numbering roughly $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 didnt respond to multiple requests for comment, and Xiang couldnt be independently reached. Now they recognised that they had to suspend trading. Anyone using the LME needs to understand that. 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. It can produce 1.8 million tons of nickel alloy and its mine in Indonesia has an annual capacity of over 3.5 million tons. 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. 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. The prices that were being seen during that Asian session were becoming disconnected from, I believe, physical reality.. Required fields are marked *. I am linking to your article in my blog, which will be published early tomorrow, Sunday, July 24. But while the short squeeze has weighed on Tsingshans short-term cash flows, strong nickel prices are to its advantage in the long run. 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. Shares in metal recycler Sims Metals hit an 11-year high of $19.55 today following a price target increase by UBS analyst Lee Power on Tuesday from $18.90 to $20.30. Yet the day before, the market had started to unravel . 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. Strong passwords include numbers,letters,and special characters. The main reason was the short squeeze on the short position of the Chinese bank China Construction Bank. 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 . 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 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. 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. Some market rumors are circulating that Glencore might squeeze Tsingshan on LME Nickel for its 60% stake in a nickel mine in Indonesia. INF News.com. 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. And that was just for the portion of the short position it held directly on the exchange about 30,000 tonnes. This matters beyond the cozy world of . Xiang was aware of flaws in his strategy, people familiar with the matter said. How Xiang got to this point is a story that encompasses Chinas emergence as a global economic behemoth. 2023 Glacier Media Group, All Rights Reserved. Trading and mining giant Glencore was the dominant holder of nickel in recent months, according to people familiar with the matter. 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. Those 18 minutes will haunt me, says the executive, who requested anonymity. Rio Tinto, the world's second-largest mining company by market capitalization, last week said it would lift annual capital investment to as much as $10 billion in 2024 and 2025, up around 25% on . Because nickel resists high temperatures, it is used in special steel and superalloys intended for aircraft engines, among other applications. He was awakened by a phone call at 5.30am. . It decided to cancel all the trades that took place on Tuesday morning$3.9 billion of them, according to a Bloomberg calculation. Xiang was aware of flaws in his strategy, people familiar with the matter said. Our analysis assumes the development of Onaping Deeps with production commencing in 2021 at a capital cost of $750 million. 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. He draws a comparison with Silver Thursday, the day in 1980 when an attempt bythe Hunt brothersto corner the silver market came unstuck. Please try again later. Others in the market may also push up prices anticipating that short covering. The nickel market was anything but calm. Mar 16, 2022 - 8.00am. At the time of the LME's trading halt, nickel had gained more than 230% in March. Long Term . . 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Required fields are marked *. Once its industrial complex reaches peak p. We had a frenzy based on speculation that accelerated on Monday and Tuesday. Investors who had booked trades during the chaotic session in the early hours of Tuesdaywere furious. But while the short squeeze has weighed on Tsingshan's . EV Nickels stock soars after announcing enormous maiden mineral resource in Ontario, Anglo seeks to invest in start-ups to cut steel CO2 emissions, Agnico Eagle reinvests in Rupert Resources and its Ikkari gold project, Glencore ordered to pay $700 million by US judge in bribery case, https://dtmagazine.com/money724-302022.php#wrap, Musk tamps down speculation that Tesla will mine lithium, Monumental shift in way junior mining stocks are valued is coming, Advance Lithium in joint venture talks with Mexicos national lithium company, Goldman warns carmakers against buying miners: It always end in tears. Pemex Reports $9.4 Billion Loss as AMLO Fails to Revive Output . That put Tsingshans banks and brokers, which include JPMorgan Chase, BNP Paribas, and Standard Chartered, in a bind. Glencore Nickel. Major international companies like BHP Group Ltd. and Rio Tinto Plc hedge against currencies, commodity prices and interest rates on an as required basis. I'll discuss why. Your email address will not be published. Cash and short-term investments. 389 8 Comments. The company went on to pioneer the large-scale production of nickel pig iron, a semi-refined and low-cost alternative to the pure metal for stainless steel. The so-called "hold short position" focuses on the word "hold" to hold the price higher, and the ultimate goal is to force Tsingshan Group's 200,000 tons of nickel to sell short positions, and there is no way to go. Now they had to pay big margin calls on the exchange while receiving no margin from their client. The Chinese government may also play a role. China's manufacturing purchasing managers' index (PMI) climbed to 52.6 last month, the highest reading since April 2012. But much of Chinas academic and business community did not believeRussia would attackits neighbor. At 1am on March 8, the market opened. 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. Nickel prices usually move a few hundred dollars per tonne in a day. To date, the company has sold a tonne of nickel for an average of $ 18,474. Its not clear to what extent Xiang saw his position as merely a hedge or as a speculative bet. In this position, you will be responsible for the drafting of sales and purchase contracts and related legal documents. 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. But while the short squeeze has weighed on Tsingshans short-term cash flows, strong nickel prices are to its advantage in the long run. Raglan Mine is a large nickel mining complex in the Nunavik region of northern Quebec, Canada.It is located approximately 100 kilometres (62 mi) south of Deception Bay. You will be able to view the post at https://dtmagazine.com/money724-302022.php#wrap in the Precious Metals section. The fallout was immediate. While few observers believed Xiang could reach that level of production, he was confident. . Feb 2021 - Dec 202111 months. The discussions are ongoing, and its not clear what stance Tsingshans banks, which include JPMorgan Chase & Co. and China Construction Bank Corp., will take. Bloomberg. By now, the entire nickel industry was in crisis. Source: LME. Nickel boosts the energy within batteries and, at the same time, allows battery makers to reduce the use of more expensive cobalt. 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. For Xiangs big short position, that was painful. Nickel is a raw material that is characterized by exceptional resistance and special properties, thanks to which it has many applications. 3.28% . . Nickelcopper ores have been mined there since 1928. People forgot that this isnt a video game retailer; its an important physical commodity. A speculative bet, you will be able to view the post at https //dtmagazine.com/money724-302022.php... Its industrial complex reaches peak p. we had a frenzy based on speculation that accelerated on Monday at $.! 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