But nothing could prepare the market for what was about to follow, with the Russia-Ukraine conflict sending prices skywards on global supply concerns. 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. The annals of commodity markets are full of tales of producers and traders, fromMetallgesellschaftto Sumitomo, that blurred the lines between hedging and speculation and ended with billions of dollars in losses. Tsingshan accounted for about half that amount. In late February and early March, Tsingshan, which had sales of 352 billion yuan ($56 billion) last year, paid its margin calls on time. Matthew Chamberlain, the LMEs chief executive officer, had stayed up to watch. The tightness in the market had been exacerbated by the presence of an unidentified trader who, according to exchange data, controlled somewhere between 50 per cent and 80 per cent of nickel warehouse warrants monitored by the LME as of last month. The LME suspended trading in nickel on Tuesday morning after one of the most dramatic price spikes in commodity market history. 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. They had offset their deals with Tsingshan by placing their own short positions on the LME. WATCH: Trading on LME is now set to resume Wednesday. Mampukan Tsingshan bertahan? If you are considering investing or trading nickel, its important to do your own research. The company paid at least some of its margin calls early on Monday, according to a person familiar with the matter. Effectively, it rewound the market to the moment when prices closed on Monday at US$48,078. 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. Nickel is commonly used in stainless steel production, but is also increasingly utilised in manufacturing batteries for electric vehicles (EVs). To gauge the magnitude of the problem, an unnamed source familiar with the trades told the, Nickel trading did resume on March 16, but the exchanges electronic trading system malfunctioned on several occasions after resumption, while preset daily limits on price movements (5 percent on the 16, The LME has been asleep at the wheel, according to Andrew Mitchell, director of nickel research at consulting firm Wood Mackenzie, who spoke to the, But the LME has defended its actions, arguing that the decisions it took were made with full regard to regulatory due process and in the interests of the market as a whole, according to a spokesman for the exchange, who spoke to UK financial-news publication, Manuel A. Muoz European Central Bank (ECB), Miguel Moreno Tripp EGADE Business School | Crowe Global, Flix Villatoro Universidad Adolfo Ibez Business School, Kenneth D. Simonson Associated General Contractors of America (AGC), Dalia A. Kader Commercial International Bank (CIB), Davi Ferreira Veronese University of So Paulo, Maria Paula Bertran University of So Paulo, Thanos Andrikopoulos University of Hull, Tim Johnson JB Super Yachts | TJB Private Travel. 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. 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. Reuters provides business, financial, national and international news to professionals via desktop terminals, the world's media organizations, industry events and directly to consumers. It could be even larger than that when positions taken through intermediaries are taken into account, people separately said. Tsingshan's 2022 nickel equivalent output is . 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. Even at that level, clients of LME brokers had failed to pay some US$500 million of margin calls in relation to their short positions on the exchange, according to a person familiar with the matter. 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. FY18 RESULTS, FY19 GUIDANCE AND CORPORATE PRESENTATION 22 AUGUST 2018 AGENDA Results Guidance Corporate Operations Growth Exploration Nickel Market DISCLAIMER AND FORWARD Then on March 7, nickels price began its parabolic ascent, surging from US$30,000 a ton to more than US$50,000. 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. LME CEO Matthew Chamberlain says suspending nickel trading and canceling the trades on the London Metal Exchange was the right decision for the sake of market stability. We do not make any representations or warranty on the accuracy or completeness of the information that is provided on this page. As of the evening of March 13, the LME had yet to announce a date for nickel trading to resume. Among them were some of the biggest names on Wall Street. The new historic high is nearly twice the previous record of $51,600 in 2007. But the Eastern European conflict also saw sizeable long positions enter the market, including major buyers Volkswagen, Glencore and JPMorgan, which instead drove prices higher. The most comprehensive solution to manage all your complex and ever-expanding tax and compliance needs. Xiang wanted to increase Tsingshans production dramatically by producing so-callednickel matte. Nickel prices usually move a few hundred dollars per ton in a day. 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. Despite that, reserves that can be economically mined are limited. 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 question is, will it continue to fail? Ghali posited to CNN. See here for a complete list of exchanges and delays. The super spike was driven by holders of short positions, including Tsingshan and its brokers, rushing to close them out. a practice known in financial markets as margin calls. Are you considering whether or not to trade nickel or want to learn more about the market? articles a month for anyone to read, even non-subscribers! Opinion. By now, the entire nickel industry was in crisis. Until yesterday, it appeared that a bailout plan for Chinese stainless steel titan Tsingshan Holding Group owned by "Big Shot" Xiang Guangda (and which was facing an $8 billion nickel margin call following the explosive surge in Nickel prices which briefly soared above $100,000/ton up 4x in just a few days, or would be if the Hong Kong-owned LME ever reopened Nickel trading) was coming along . The major market events for the week ahead right in your inbox. China scoffs at FBI claim that Wuhan lab leak likely caused COVID pandemic, China's abrupt reopening sparks student accommodation crisis in Australia, Reporting by Pratima Desai; additional reporting by Sinead Cruise and Eric Onstad in London; Editing by Megan Davies, Jan Harvey, Tim Ahmann and Cynthia Osterman, U.S. House panel approves bill giving Biden power to ban TikTok, Russia tries to close ring on Bakhmut as Ukrainians mount 'furious resistance', Wall St falls as yields rally on hawkish comments, data, Erdogan indicates Turkey elections to be in May, three months after quake, Massachusetts U.S. Attorney taps ex-DOJ watchdog to defend her in ethics probe, Another BoE rate rise isn't inevitable, Bailey says, China's Xi cements ties with Belarus leader against background of Ukraine war, Russia's Lavrov meets Indian counterpart ahead of G20 talks, Exclusive news, data and analytics for financial market professionals. Late Tuesday, the exchange said it anticipates trading wont resume before Friday. The war in Ukraine surprised the market and led to a price surge, pushing Tsingshan's margin to billions as it rose in-line with nickel prices. Pada titik ini, posisi short Tsingshan dibekukan. Most analysts sided with Xiang, at least in the medium term, believing that nickel productionled by Tsingshan and its competitors in Indonesiawould outpace demand. 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. Copyright | A sharp surge in nickel prices triggered margin call fears at the London Metal Exchange which suspended trading after prices doubled in hours. Everything changed when Russia invaded Ukraine. Chinese nickel giant at center of action, Tsingshan, received financial lifeline from banks to help meet margin calls related to $8 billion in paper losses Since Russia invaded Ukraine at the. Some aggrieved traders are already preparing to take legal action against the exchange. Russia is the worlds third-largest producer of nickel and its largest exporter of refined nickel metalthe type deliverable on the LME. Tsingshan was betting that nickel prices would slump but instead they staged an unprecedented rally amid severe economic sanctions against Russia, a major global producer of the metal, over its invasion of Ukraine. Indeed, Russia is the worlds third-biggest nickel producer after Indonesia and the Philippines. Chinese entrepreneur Xiang Guangda has been caught out by nickel's price surge. 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 . "For the period of the standstill, the participating hedge banks agree not to close out positions against Tsingshan or to make further margin calls in respect of existing positions. Build the strongest argument relying on authoritative content, attorney-editor expertise, and industry defining technology. In an earlier interview with Chinese news outlet Yicai, Xiang blamed "foreigners making some moves" for nickel's price spike. At $2,250 a tonne, the capital required on 300,000 tonnes of nickel would be $675 million, according to Reuters calculations. That means it would have suffered much more than $US2 billion ($2.7 billion) of daily losses at the most extreme point of nickels surge. This report studies the Ferronickel market, covering market size for segment by type (Ferronickel (Nickel15%), Ferronickel (Nickel15-25%), etc. The majority of retail investor accounts lose money when trading CFDs. For most of the past decade, theyd traded between US$10,000 and US$20,000. Hansen of Concord Resources argues that financial investors who traded nickel last week should have been prepared for the LME to step in. 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. 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. The most notable holder of short positions is Tsingshan Holdings - one of the world's largest nickel and stainless steel producers - which is believed to own positions on about 100,000 tons of nickel with paper losses totaling up to $8 billion before the London Metal Exchange halted trading. This copy is for your personal, non-commercial use only. Advertise | Careers | Editorial Guidelines | CCBI Global Markets is another creditor, two separate sources said. Our Standards: The Thomson Reuters Trust Principles. Nickel trading did resume on March 16, but the exchanges electronic trading system malfunctioned on several occasions after resumption, while preset daily limits on price movements (5 percent on the 16th, then 8 percent the following day, 12 percent on March 18 and 15 percent from March 21) prevented futures prices from falling sufficiently to levels that would entice buyers to enter the market once more. Now, people familiar with the matter say, the exchange is likely to introduce such measures as position limits and greater transparency. Tsingshan's were even larger, numbering roughly US$3 billion, according to a Bloomberg calculation based on the company's total short positionwhich, even after Xiang . Tsingshan, the world's largest stainless steel producer, is rumoured to have built a big short position in nickel before a 250% rally in [] The price was frozen, below the record high but still at US$80,000 a ton. By now, Tsingshan wasnt the only nickel company that was strugglingjust the biggest. Nickels price moved sharply higher in the week after Russias invasion. After trading was suspended Tuesday following an unprecedented surge in prices, the London Metal Exchange said it does not expect nickel trading to resume before March 11. 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.. 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 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. Tsingshan Holdings was founded in 1988 by Xiang Guangda in Wenzhou. Mr Xiang told Chinese news outlet Yicai that Tsingshan did not have any problems with its nickel trading. Last chance for up to $40 off TurboTax, All Jeans + Pants 25% off! Weve received a lot of phone calls today, he said. But according to Bloomberg, the LME refrained from putting it into default, which allowed the broker to settle the margin calls the following day after several clients, including Tsingshan, received loans to cover their positions. This will allow the trader to buy the security back at a lower price, return it to the lender and hopefully pocket a handsome profit. At 1 a.m. on Tuesday, the market opened. Distribution and use of this material are governed by Li Huan/Red Star News/VCG via Getty Images. Bloombergs Joe Deaux reports. Tsingshan is an excellent Chinese enterprise, and our positions and operations dont have any problems.. 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