tsingshan nickel margin call

tsingshan nickel margin call

Then, as now, a key factor was the intervention of the exchange. Despite that, reserves that can be economically mined are limited. Tsingshan is an excellent Chinese enterprise, and our positions and operations dont have any problems.. The major market events for the week ahead right in your inbox. Hansen of Concord Resources argues that financial investors who traded nickel last week should have been prepared for the LME to step in. 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 started hurrying to buy back nickel contracts, sending the price of nickel spiraling ever higher. Capital Com is an execution-only service provider. 3.1 What is the margin call to Tsingshan? Some hedge funds were buying nickel contracts in a bet on the electric vehicle boom. 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. LMEs Chamberlain defended canceling the trades. At 8:15 a.m., the screens stopped flashing, hours before the in-person pit trading session was even set to begin. Screen for heightened risk individual and entities globally to help uncover hidden risks in business relationships and human networks. HONG KONGChinese nickel titan Tsingshan Holding Group faces billions of dollars in trading losses, people familiar with the company said, after .css-1h1us5y-StyledLink{color:var(--interactive-text-color);-webkit-text-decoration:underline;text-decoration:underline;}.css-1h1us5y-StyledLink:hover{-webkit-text-decoration:none;text-decoration:none;}Russias war in Ukraine set off an unprecedented rise in the price of a key metal used in stainless steel and electric-vehicle batteries. The arrangement will also help the pave the way for the London Metal Exchange to restart nickel trading, they said. When it was flying towards US$100,000, you could feel the damage, and you knew companies were fighting for their existence, says John Browning, founding partner of brokerage Bands Financial Ltd. and a former LME board member. But to hedge against a a drop in prices, they use. It was a classic short squeeze, as the pain for Tsingshan, its brokers, and other shorts created a self-reinforcing cycle. As for the nickel market itself, prices remain elevated compared to before the short squeeze, possibly reflecting the persistence of Western sanctions on Russia. However, for business days 7th and 8th March, they would remain at . But its obligations dwarfed its available cash and bank credit. See here for a complete list of exchanges and delays. 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. read more. Just over a year after the historic short squeeze involving video-game retailer GameStop sent shockwaves around the financial world, a similar episode broke out in early March, this time on the London Metal Exchanges (LME) nickel market. Bloomberg: Balance of Power focuses on the politics and policies being shaped by the agenda of President Biden's administration. Terms & Conditions Finance Publishing . This copy is for your personal, non-commercial use only. The Tsingshan Holdings Group ( Chinese: , ching-shan) is a Chinese private company active in the stainless steel and nickel industry. Pleased to report an extremely strong year for the Nickel Industries and the. Brokers, in turn, must hold margin at the clearing house, LME Clear. Tsingshan, a privately-held company, and other 'shorts' faced larger margin calls on their short bets after the LME raised the amount of money companies had to deposit with it to cover their exposure to falling nickel prices, the three sources said. Remember, when prices move up, traders like Xiang who have sold futures contracts face margin calls; they must put up more cash to cover potential losses. Investors who had booked trades during the chaotic session in the early hours of Tuesdaywere furious. But since last year, Tsingshan has also started to produce a source of nickel for batteries. The LME suspended trading in nickel on Tuesday morning after one of the most dramatic price spikes in commodity market history. Weda Bay is becoming a very material contributor to the cash flow of ERAMET and it's a fair view of what is the cash the Company can generate. Comparable-store sales rose 19.3% in fiscal 2020 and grew another 14.4% year over year in the first nine months of 2021. read more. The war in Ukraine surprised the market and led to a price surge, pushing Tsingshans margin to billions as it rose in-line with nickel prices. If you are considering investing or trading nickel, its important to do your own research. For participants in commodities exchanges, a price rally is not necessarily good news. Now they had to pay big margin calls on the exchange while receiving no margin from their client. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. For the LME, the future isunclear. 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. 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. 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 simple fact here is that we did not have visibility over the size of the risk, Matthew Chamberlain, the LMEs chief executive, also stated. https://www.wsj.com/articles/chinese-nickel-giant-tsingshan-faces-8-billion-trading-loss-as-ukraine-war-upends-market-11646765353. The London Metal Exchange initially announced rule changes late Monday in respond to a daily spike of as much of 90% (Reuters) Nickel, used in stainless steel and electric-vehicle batteries . Xiang Guangda -- who controls the world's largest nickel producer, Tsingshan Holding Group Co., and is known as "Big Shot" in Chinese commodity circles -- has closed out part of his company's short position and is considering whether to exit the wager altogether, the people said. Tsingshan's nickel matte plans could be 1st step into lithium battery value chain. The London nickel market has been closed since last Tuesday morning, when the exchange intervened after prices spiked as much as 250% in two days, and the standstill announced by Xiangs Tsingshan Group Holding Co. could provide the certainty needed to restart trading. China's Tsingshan Holding Group bought large amounts of nickel to reduce its short bets on the metal and its exposure to costly margin calls, turbocharging a record rally fuelled by the conflict . It is up nearly 400% so far this year. 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. Why bet against nickel when you have a nickel business? Access unmatched financial data, news and content in a highly-customised workflow experience on desktop, web and mobile. Given that JPMorgan was reported as the biggest trading counterparty against which Tsingshans nickel trades were made, the US bank led the subsequent agreement to arrange a rescue credit facility, secured from various lenders, including China Construction Bank (CCB), to help the Chinese nickel giant address its immediate liquidity squeeze. Assessing the Incremental Costs of Regulation and Supervision Faced by Next-Gen Operating Models for Bankers and Advisors, Macroprudential Policy and Real Estate Funds. Indeed, Russia is the worlds third-biggest nickel producer after Indonesia and the Philippines. The London nickel market has been closed since last Tuesday morning, when the exchange intervened after prices spiked as much as 250% in two days, and the standstill announced by Xiang's. Its not clear to what extent Xiang saw his position as merely a hedge or as a speculative bet. This weeks spike in prices has played out principally on the LME, and many traders expect the price to return to more normal levels once the margin call chaos has been resolved. At 1 a.m. on Tuesday, the market opened. Subsequent reports suggested that only one-fifth of Tsingshans total nickel exposure was visible to the exchange; the rest was held in private over-the-counter trades with banks including JPMorgan Chase, BNP Paribas, Standard Chartered and United Overseas Bank Ltd. As such, Guangda was aiming for his massive short position to dominate the market and send the LME nickel price down. 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 Wall Street Journal. The fallout was immediate. 4.3 Global Ferro Nickel Sales Volume, Revenue, Price and Gross Margin (2016-2022) 4.4 United States Ferro Nickel Sales Volume, Revenue, Price and Gross Margin (2016-2022) 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. Save my name, email, and website in this browser for the next time I comment. Read on for our analysis on the recent LME nickel short squeeze and the market outlook. 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. Xiang shrugged off suggestions to reduce short positions, Tsingshans nickel short position stood at about 150,000 tons. 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. Weve received a lot of phone calls today, he said. LONDON (Reuters) -- 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 . During the standstill agreement, the company and banks will discuss a standby secured liquidity facility, Tsingshan said. Contact us | Continue reading your article witha WSJ subscription, Already a member? The price spike left Tsingshan exposed to $8 billion USD of trading losses whilst struggling to meet their margin calls. This created an unprecedented LME nickel short squeeze. Tsingshan has been struggling to pay margin calls to its brokers, according to people familiar with the situation. read more. a practice known in financial markets as margin calls. See here for a complete list of exchanges and delays. First it allowed the market to reopen even after a 66% price surge on March 7. NIC's operations and cash flow remained stable in 2022 despite Tsingshan's significant loss on its nickel short position in March 2022. If nickel prices stay lofty it could complicate the energy transition with electric vehicle batteries costing more to produce. 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. A record-breaking rally in nickel prices that led the London Metal Exchange to halt trading on Tuesday is putting increased pressure on the Chinese stainless steel producer Tsingshan and its billionaire co-founder. Build the strongest argument relying on authoritative content, attorney-editor expertise, and industry defining technology. ), by sales channel (Direct Channel, Distribution Channel), by player (Shandong Xinhai Technology, Tsingshan Holding Group, Eramet, Linyi Yichen Alloy, Jiangsu Delong Nickel Industry . Given nickel matte prices of roughly $15,421/t May 18, we calculate a profit margin of $5,571/t for Tsingshan's nickel in matte. It did not provide any other details, such as how long the standstill period would last. "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. Tsingshan and others had to buy . Nickel prices on the LME jumped to record highs above $100,000 a tonne on March 8 as Tsingshan bought large amounts to reduce its short positions in the metal, which is used to make stainless steel and electric vehicle batteries. Tsingshan sold 200,000 ton March 2023 contracts at price of $20 per kilo. Tsingshan is also a nickel miner and operates nickel pig iron mines and production facilities. The LME at the end of the day is a physical metal market, he says. The price was frozen, below the record high but still at US$80,000 a ton. 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 . 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. Tsingshan Holdings has secured loan packages from various lenders, according to a Bloomberg report citing unnamed sources, following a record short squeeze that saw nickel prices more than double in hours earlier this week. The metals industry, financial regulators and Chinese officials rushed to resolve a crisis in Londons nickel market, which remained on ice after an ill-fated trade sparked mammoth price gains and billions of dollars of losses. Its not just a casino., Avenue Living CEO foresees consistency in 2021 real estate trends, Millennials must use COVID as an opportunity to prepare for their future: Financial planner, Canadian cities will bounce back and people will want to return to work: Edmonton Mayor Don Iveson, How employers are embracing flexible work arrangements, Retirees need to focus on risk management: Som Seif on the future of personal finances, Pandemic puts hair salons in startup mode: Ray Civello, Canadian Western Bank looking to flexible workplace policies post-pandemic: CEO, Many moving parts to how leaders can help entrepreneurs in the pandemic: Arlene Dickinson, How investors should view the real estate market, How real estate adapts as COVID puts urban living to the test, Chinese tycoon behind big nickel short faces billions in losses, LME CEO: Suspending Nickel Trading Was Right Decision. Tsingshan accounted for about half that amount. Jack Farchy, Alfred Cang and Mark Burton, Bloomberg News. read more. The unprecedented rally prompted the 145-year-old exchange to suspend nickel trading Tuesday. But recent events have certainly injected a dose of volatility into the market. Yet the day before, the market had started to unravel, with prices rising by astunning66 per cent to US$48,078. Why? Reuters, the news and media division of Thomson Reuters, is the worlds largest multimedia news provider, reaching billions of people worldwide every day. Its been under growing pressure to meet the payments in recent days, the people said. All quotes delayed a minimum of 15 minutes. Bloomberg: Balance of Power focuses on the politics and policies being shaped by the agenda of President Biden's administration. Short-covering trades made last week by the Chinese billionaire contributed to a swift, huge surge. Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com. As of the evening of March 13, the LME had yet to announce a date for nickel trading to resume. A sharp surge in nickel prices triggered margin call fears at the London Metal Exchange which suspended trading after prices doubled in hours. At the center of the action is Chinese nickel titan Tsingshan Holding Group, the worlds biggest producer of a metal used in stainless steel and .css-1h1us5y-StyledLink{color:var(--interactive-text-color);-webkit-text-decoration:underline;text-decoration:underline;}.css-1h1us5y-StyledLink:hover{-webkit-text-decoration:none;text-decoration:none;}electric-vehicle batteries. Nickel short interest was created by Tsingshan. Tsingshan has been struggling to pay margin calls to its brokers, according to people familiar with the situation. Some think this could herald the end of the exchange itself. Distribution and use of this material are governed by Erin Jonasson. Four or five of the brokerages that are LME members would have failed, a shock that could have devastated the global metals industry. Trimegah menilai bisa. The most comprehensive solution to manage all your complex and ever-expanding tax and compliance needs. Browse an unrivalled portfolio of real-time and historical market data and insights from worldwide sources and experts. Exchanges sometimes cancel trades when technology glitches or fat fingers cause one-off mistakes. All quotes delayed a minimum of 15 minutes. If you rely on the information on this page then you do so entirely on your own risk. The LMEs special committee held another call at about 6 a.m. Now they recognized that they had tosuspend trading. Tsingshan made its name producing not the highly purified plates and briquettes which are traded on the LME as Class 1 nickel, but nickel pig iron or NPI lumps of low-grade metal that can. 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. How to Geta Free Flight to Hong Kong in 500,000 Airline Ticket Giveaway, Apple Suppliers Are Racing to Exit China, AirPods Maker Says, Stocks, Bonds Drop as Traders Weigh Data, Fedspeak: Markets Wrap, Microsoft Expands Game Pass as Regulators Fret Over Activision Deal, Cash Is Paying More Than Traditional Stock-Bond Portfolio. At the current price of nickel, the brokers themselves wouldnt be able to pay their margin calls, they told the LME. 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 Initial Margin was $20,000 per contract. Screen for heightened risk individual and entities globally to help uncover hidden risks in business relationships and human networks. The broker was able to settle the margin calls on Tuesday after several clients, including Tsingshan, got loans to cover their positions, one of the people said. By now, Tsingshan wasnt the only nickel company that was strugglingjust the biggest. 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 City A.M. during the week after the suspension. Xiangs short position has now racked upbillions of dollars in losses. But this week the rally became a melt-up, with prices surging as much as 250 per cent in little more than 24 hours, to an all-time high of $US101,365 a tonne. While investors who sell stocks short want the price to drop, in commodity markets many producers, traders, and users take short positions as a hedge against losses on the physical commodities they hold in inventories. .css-16c7pto-SnippetSignInLink{-webkit-text-decoration:underline;text-decoration:underline;cursor:pointer;}Sign In, Copyright 2023 Dow Jones & Company, Inc. All Rights Reserved, Final Early Bird Pricing! Bloomberg News' Joe Deaux reports. 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. Would last the most dramatic price spikes in commodity market history worlds third-biggest nickel producer after and. Nickel prices triggered margin call fears at the London Metal exchange to restart nickel trading Tuesday analysis on politics... Entities globally to help uncover hidden risks in business relationships and human networks leverage... And come with a high risk of losing money rapidly due to leverage Advisors, Macroprudential and. Heightened risk individual and entities globally to help uncover hidden risks in business relationships human! When you have a nickel miner and operates nickel pig iron mines and production facilities for your,... Started hurrying to buy back nickel contracts, sending the price spike left tsingshan exposed to $ billion... Days, the LME had yet to announce a date for nickel trading to.! The biggest the arrangement will also help the pave the way for the LME its... At US $ 48,078 brokers, according to people familiar with the situation the rally... On desktop, web and mobile had tosuspend trading USD of trading losses whilst struggling to pay calls... The record high but still at US $ 80,000 a ton its to... All your complex and ever-expanding tax and compliance needs a standby secured liquidity facility tsingshan... 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