LMEs Chamberlain defended cancelling the trades. Were working to restore it. Xiang isnt just a financial trader making paper bets on price moves. Neither party seems very keen on this idea, however. 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. 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. To date, the company has sold a tonne of nickel for an average of $ 18,474. 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. 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. Some hedge funds were buying nickel contracts in a bet on the electric vehicle boom. 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. Required fields are marked *. Ore is processed at the Strathcona mill. Nickel boosts the energy within batteries and, at the same time, allows battery makers to reduce the use of more expensive cobalt. The production of Glencore Nikkelverk in 2019. But its extremely unusual for an exchange to cancel whole sessions of trading after the fact. Now they had to pay big margin calls on the exchange while receiving no margin from their client. 1w. Crucially, the decision meant traders wouldnt need to pay margin calls on the basis of the $80,000 nickel price. Glencore is a leading producer and marketer of nickel, as well as a recycler of nickel-containing materials such as batteries. 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. Hansen of Concord Resources argues that financial investors who traded nickel last week should have been prepared for the LME to step in. Not everyone shared his pessimism about prices. Credit: INF News.com. We're taking you for a deep dive into the world of copper - a versatile metal and important component for a low-carbon future. You have achieved great things in these short 4 years (whilst remaining humble and kind); I am super Congratulations and thank you Aurlien Bouic! Nickel is a raw material that is characterized by exceptional resistance and special properties, thanks to which it has many applications. Executives fromGoldman Sachs Group Inc.voiced their displeasure at the decision on a call with Chamberlain. Follow the topics, people and companies that matter to you. Qingshan Holding Group,Nickel,Futures Contract, Paris Looms as Europe's Largest Financial Market, French Economy Minister Says, Alibaba, Spain's El Corte Ingles Department Store Ally on Digital Retail, China's GEM to Supply 100,000 Tons of Lithium Battery Materials to Korea's Ecopro, Toshiba Home Appliances Returns to Profit After Midea Takeover, Chairman Says, How AR is Poised to Change Business Forever. Production 2019. The two major mining companies in Sudbury are working together to . For the LME to cancel nickel trades between willing buyers and sellers is unforgiveable. Xiang isnt just a financial trader making paper bets on price moves. 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 (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. Xiang has told his banks and brokers that he still thinks the nickel price will fall andwants to keephis short position, Bloomberg reported on Thursday, citing people familiar with the matter. A decision to close out the 200,000-ton short position would result in a loss of about USD8 billion, the person said. 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. 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. It was 5.42 am on March 8 in London when the nickel market broke. Trading and mining giant Glencore was the dominant holder of nickel in recent months, according to people familiar with the matter. Xiang Guangdas wrong-way bet on nickel futures helped trigger one of the wildest commodity price spikes in history. 2023 Glacier Media Group, All Rights Reserved. The paper loss stood at $8 billion on Monday, before violent moves in nickel prices led the London Metal Exchange to suspend trading in the metal on Tuesday, one of the people said. MINK. Just after 6am, the price of nickel passed $US100,000 a tonne. The LME at the end of the day is a physical metal market, he says. Russia is the worlds third-largest producer of nickel and its largest exporter of refined nickel metal the type deliverable on the LME. Glencore Nickel. The latest price was A$0.04 (25-minute delay). This suggests a possible upside of 27.1% from the stock's current price. What does Tsingshan Group's rival, Glencore, do? Some hedge funds were buying nickel contracts in a bet on the electric vehicle boom. Activity . LME brokers and their clients were hit with margin call after margin call. By now, the entire nickel industry was in crisis. Save my name, email, and website in this browser for the next time I comment. On Monday, a week after trading had been suspended, Xiang was close to securing a loan facility from JPMorgan Chase and other banks that would allow him to maintain his short position and could lead to the market reopening. By now, Tsingshan wasnt the only nickel company that was strugglingjust the biggest. Pemex Reports $9.4 Billion Loss as AMLO Fails to Revive Output . 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. 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. Earlier this week, nickel prices in London spiked byas much as 250%in little more than 24 hours. Certain sections of this system have been patented. 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. Sign up to get it every weekday morning. If it can weather the current storm, Tsingshan which recorded more than $40 billion in annual revenue over the past two years should be a prime beneficiary of higher nickel prices as the worlds top producer. . . Tsingshan needs to increase the contract margins or roll over the futures if it decides to keep the contracts, which would require a huge amount of cash, an analyst told Yicai Global. Yet the firm's lucrative . He draws a comparison with Silver Thursday, the day in 1980 when an attempt bythe Hunt brothersto corner the silver market came unstuck. When it was flying towards $100,000, you could feel the damage, and you knew companies were fighting for their existence, says John Browning, founding partner of brokerageBands Financial Ltd.and a former LME board member. But its obligations dwarfed its available cash and bank credit. Then on March 7, nickels price began its parabolic ascent, surging from $US30,000 a tonne to more than $US50,000. Our analysis assumes the development of Onaping Deeps with production commencing in 2021 at a capital cost of $750 million. Everything changed when Russia invaded Ukraine. Tsingshan Group is the partner of Huayou that develops the nickel project. MMC Norilsk Nickel Recent Development 11.3 Glencore 11.3.1 Glencore Company Detail 11.3.2 Glencore Business Overview 11.3.3 Glencore Nickel Mining . 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. He was awakened by a phone call at 5:30 a.m. Sr. Exploration Geologist CMDIC Collahuasi 2006 - 2007 1 year. Xiang didnt believe the rally would last. Xiang was aware of flaws in his strategy, people familiar with the matter said. Anyone using the LME needs to understand that. . 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. The dollar hit a one-week low earlier Wednesday after China's yuan gained. This type is different from the mainstream ferro-nickel and nickel pig iron. Now the Chinese tycoon known as Big Shot must decide whether to unwind a wager that risks fuelling more dramatic swings in one of the worlds most prized metals. Born in 1958, he started out making frames for car doors and windows in Wenzhou, in eastern China. 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. The LME suspended nickel-market trading on Tuesday and the Shanghai Futures Exchange followed suit a day later, after prices on Chinas top commodities bourse hit their daily upward limit. Provided short/mid/long/strategic schedules using Deswik. 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. 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 . The giant commodity traderGlencore Plcalso had a position on the LME that would benefit from rising prices. Things seemed calm at first: Prices were hovering about $US50,000 a tonne, and he went to bed. The prices that were being seen during that Asian session were becoming disconnected from, I believe, physical reality.. Glencore Headquarters. I see all automakers within a short time creating their own 4680 . 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 . 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. 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. 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. The operations also include the Sudbury smelter. 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. 02 March 2023. Xiangs short position has now racked upbillions of dollars in losses. Nickel prices usually move a few hundred dollars per ton in a day. 92 132 MT. The seeds of the epic short squeeze were sown last year, when nickel, like all commodities, was rallying from its Covid-era low. 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. But while the short squeeze has weighed on Tsingshans short-term cash flows, strong nickel prices are to its advantage in the long run. 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. Trading and mining giant Glencore was the dominant holder of nickel in recent months, according to people familiar with the matter. Nickelcopper ores have been mined there since 1928. Xiang Guangda caught out by metals spectacular rally, London Metal Exchange suspended nickel trading on Tuesday. Please try again later. . Finance > Capital-markets. For a while, it wasunclear which view of the market would prevail. The price was frozen, below the record high but still at $80,000 a ton. 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. Others took to social media. The company has assured creditor banks in China that its . There are also traders making plans to abandon the LME nickel contract, a move that would reduce market liquidity, making it harder for everyone from miners to car companies to manage their exposure to prices and access financing. 1. The fallout was immediate. It decided to cancel all the trades that took place on Tuesday morning some $US3.9 billion of them. It was 5.42 am on March 8 in London when the nickel market broke. I'll discuss why. WATCH: The Chinese tycoon, known as Big Shot in commodities circles is said to be facing billions of losses. Our nickel operations are in Canada, Australia, Norway, and New . For most of the past decade, theyd traded between $10,000 and $20,000. Excellent coverage of an earth-shaking event. Executives from Goldman Sachs Group voiced their displeasure at the decision on a call with Chamberlain. Last modified on Wed 15 Feb 2023 06.23 EST. Yet the day before, the market had started to unravel . Now they had to pay big margin calls on the exchange while receiving no margin from their client. While few observers believed Xiang could reach that level of production, he was confident. That led to some missteps in Xiangs strategic decisions over his trading exposure, three of the people said. 2017 - 2018 Yicai Global, Yicai Media Group. . We produce some of the world's purest nickel. 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. Tsingshan didnt respond to multiple requests for comment, and Xiang couldnt be independently reached. Enter the code below to reset your password. He blamed foreigners making some moves for nickels price spike in an interview with Chinese news outlet Yicai. The LMEs special committee held another call at about 6am. 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