3.28% . Investors who had booked trades during the chaotic session in the early hours of Tuesday were furious. As Russias invasion of Ukraine pushed up prices, short-position holders including Tsingshan scrambled to trim their bets. The dollar hit a one-week low earlier Wednesday after China's yuan gained. Learn how we produce copper and the uses it is put to. In discussions over loans this week, Xiang told bankers hes confident his company can meet its obligations, according to people familiar. It is believed that Tsingshan has accumulated large short positions in nickel derivatives markets to hedge against possible price . 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. Trafigura Lines Up Russia Aluminum Deal in Challenge to Glencore. . Copper. Crucially, the decision meant traders wouldnt need to pay margin calls on the basis of the $80,000 nickel price. Vale and Glencore announced today that they've entered a partnership to begin a feasibility study to explore Nickel Rim South. Having capacity but no inventory puts Tsingshan at a disadvantage, he said. Executives fromGoldman Sachs Group Inc.voiced their displeasure at the decision on a call with Chamberlain. It decided to cancel all the trades that took place on Tuesday morning some $US3.9 billion of them. But today things have reversed, that is, Tsingshan Group has prepared 200,000 . The Chinese government may also play a role. Anyone using the LME needs to understand that. 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. Nickels price moved sharply higher in the week after Russias invasion. Earlier this week, nickel prices in London spiked byas much as 250%in little more than 24 hours. 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. Trading and mining giant Glencore Plc was the dominant holder of nickel in recent months, according to people familiar with the matter. Why bet against nickel when you have a nickel business? The giant commodity traderGlencore Plcalso had a position on the LME that would benefit from rising prices. 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. 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. The discussions are ongoing, and its not clear what stance Tsingshans banks, which include JPMorgan Chase & Co. and China Construction Bank, will take. Major international companies like BHP Group Ltd. and Rio Tinto Plc hedge against currencies, commodity prices and interest rates on an as required basis. All Rights Reserved. (Podcast). (" Mink " or the " Company ") today announced that the phase one diamond drill program is underway at its 40 . Russia is the worlds third-largest producer of nickel and its largest exporter of refined nickel metalthe type deliverable on the LME. Tsingshans nickel doesnt match the grade used in settlement on the LME, so the contracts arent a perfect hedge. 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. Hes in the physical nickel business. As the price rose through the London day after offices in Asia had closed, Tsingshan started struggling to pay, the people say. 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. Mid Term. Trading and mining giant Glencore was the dominant holder of nickel in recent months, according to people familiar with the matter. The wild rise of nickel drew comparisons to the short squeezes in meme stocks such as GameStop Corp. that gripped retail investors for much of last year. 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. 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. 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. Nicknamed Big Shot in Chinese commodity circles, people who know him say he has absolute confidence in his convictions and doesnt hesitate to bet big on his visions for the future. 115 000 MT. Canada Nickel Company Inc. $1.24. Xiang was aware of flaws in his strategy, people familiar with the matter said. 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. However, Xiang believed the risks to be manageable, the people said, even as anunidentified nickel stockpilercontrolled at least half of the inventories on the exchange. Activity . At the current price of nickel, the brokers themselves wouldnt be able to pay their margin calls, they told the LME. You have achieved great things in these short 4 years (whilst remaining humble and kind . 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. . While Russias nickel exports havent been targeted by sanctions, US and European buyers have nonetheless sought alternatives to Russian sources. 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. articles a month for anyone to read, even non-subscribers! Xiang wanted to increase Tsingshans production dramatically by producing so-callednickel mattefor electric vehicle batteries. Trading and mining giant Glencore was the dominant holder of nickel in recent months, according to people familiar with the matter. View analysts price targets for GLEN or view top-rated stocks among Wall Street analysts. At current prices, nickel would comprise 12% of Glencore's EBITDA. Stainless steel with nickel content is omnipresent, for example in buildings, bridges and kitchen appliances. But its obligations dwarfed its available cash and bank credit. Nickel prices usually move a few hundred dollars per tonne in a day. Raglan Mine is a nickel-copper operation located in the Arctic region at the extreme limit of northern Quebec. 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. He blamed foreigners making some moves for nickels price spike in an interview with Chinese news outlet Yicai. Not everyone shared his pessimism about prices. In cobalt, a Chinese state-owned firm is also quite large, but Glencore is still the largest producer of cobalt in the free world. . Long Term . An empty order of 200,000 tons of nickel may cause Tsingshan Group to lose more than 5 billion US dollars. 39 000 MT. Elon Musk wanted to buy 10-20% of Glencore, but refused to. Now, the traders watched with a mixture of horror and grim fascination as the price went skyward. 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. The metal is found in all our homes as a key ingredient of stainless steel. Sulphuric acid. But while the short squeeze has weighed on Tsingshans short-term cash flows, strong nickel prices are to its advantage in the long run. At the time of the LME's trading halt, nickel had gained more than 230% in March. Its not clear to what extent Xiang saw his position as merely a hedge or as a speculative bet. They include: Koniambo is a large-scale integrated ferronickel mining and processing complex. The LME at the end of the day is a physical metal market, he says. LME brokers and their clients were hit with margin call after margin call. Glencore Nickel. Strong passwords include numbers,letters,and special characters. Explore the latest reports and results, including financial results, production reports and our annual report. In a squeeze, rising prices put traders betting on a drop in an ever-tougher financial position, forcing them or brokers and banks doing business on their behalf to buy the asset, a trade known as short covering that can drive prices even higher. 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. Anyone using the LME needs to understand that. Four or five of the brokerages that are LME members would have failed, a shock that could have devastated the global metals industry. 6 kt/a nickel in concentrate). As at January 31, 2023 Glencore holds 72,008,404 Common Shares, representing approximately 70.8% of the issued and outstanding Common Shares. China's manufacturing activity expanded at the fastest pace in more than a decade in February. The product to deliver with LME nickel contracts is cathode nickel containing at least 99.8 percent nickel, in accordancewiththeAmerican Society for Testing and Materials' specifications. Please try again later. The fallout was immediate. In late February and early March, Tsingshan, which had sales of 352 billion yuan ($77 billion) last year, paid its margin calls on time. At 8.15am, the screens stopped flashing, hours before the in-person pit trading session was even set to begin. Nickel prices usually move a few hundred dollars per ton in a day. They held a hurried call on Monday evening, but decided to allow the nickel market to continue trading. 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. Tsingshan is in touch with relevant parties and has the support of Chinese government departments and leaders, he added. Many producers, traders, and users of nickel with short positions on the LME were facing margin calls many times larger than they were prepared for. (By Jack Farchy, Alfred Cang and Mark Burton, with assistance from Sridhar Natarajan), Your email address will not be published. Find the latest Glencore plc (GLNCY) stock quote, history, news and other vital information to help you with your stock trading and investing. Investors who had booked trades during the chaotic session in the early hours of Tuesdaywere furious. Not everyone shared his pessimism about prices. Its unclear whether he will get his way. How Xiang got to this point is a story that encompasses Chinas emergence as a global economic behemoth. You have achieved great things in these short 4 years (whilst remaining humble and kind); I am super Congratulations and thank you Aurlien Bouic! This matters beyond the cozy world of . Because nickel resists high temperatures, it is used in special steel and superalloys intended for aircraft engines, among other applications. Late Tuesday . The Nikkelverk Operations. It was 5.42 am on March 8 in London when the nickel market broke. 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. . Overseas market players have made some moves, Xiang said, driving up nickel prices in the last two days. We're taking you for a deep dive into the world of copper - a versatile metal and important component for a low-carbon future. What does Tsingshan Group's rival, Glencore, do? Nickels 250% price spike in little more than 24 hours plunged the industry into chaos, triggering billions of dollars in losses for traders who bet the wrong way and leading theLondon Metal Exchangeto suspend trading for the first time in three decades. Nickel is also used in certain types of steel which lower magnetic properties. 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. The prices that were being seen during that Asian session were becoming disconnected from, I believe, physical reality.. 21 962. 4 354 . 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. Anglo, which produced 59.3 million tonnes of iron ore last year, aims to halve its Scope 3 indirect emissions by 2040. In theory, there should be two options for this 200,000 tons of nickel short order: 1. This was the most disorderly move in a metal Ive seen in my career, says Mark Hansen, CEO of trading house Concord Resources. 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. Stephen Engle reports. 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. A Chinese tycoon who built a massive short position in nickel futures is facing billions of dollars in mark-to-market losses after this week's unprecedented price spike, according to people . Glencore Mine Raglan Feb 2014 - Mar 2018 4 years 2 months. 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. Beijing is supportive of him, Xiang told contacts recently. Others took to social media. In turn, the extraction of precious metals by the company in 2021, i.e. People forgot that this isnt a video game retailer; its an important physical commodity.. 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. In the short term, a package of loans from Chinese and international banks will help Tsingshan meet its immediate liquidity squeeze. Harjavalta nickel smelter in Finland (Credit: Boliden). Save my name, email, and website in this browser for the next time I comment. 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. Several large brokers got margin calls of close to $1 billion each over the course of the day. The investment is part of Ruperts non-brokered private placement for gross proceeds of about $35 million. Inability to deliver the products was a big problem for Tsingshan, the analyst added, noting that the company has nickel iron, stainless steel, and nickel matte but noelectrolytic nickel, which is the type traded on the LME. Despite the recent upheaval, his company still remains the biggest in the nickel industry. Were working to restore it. #GlencoreCopper #MetalOfTheFuture https://lnkd.in/eEqPmJn9. Tsingshan Group placed a short nickel order, and the matter of being shorted by the opponent was brushed off. 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 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. The metal is found in all our homes as a key ingredient of stainless steel. For most of the past decade, theyd traded between $US10,000 ($13,700) and $US20,000. Glencore's Koniambo mine is located in New Caledonia, mining nickel in this French territory in the South Pacific. Coal Department. Mark Hansen, chief executive officer of Concord Resources, Help using this website - Accessibility statement. People familiar with the discussions said the exchange would ideally prefer to wait until Xiang has reached a resolution with his banks and brokers. Glencore Ordered to Pay $700 Million in US Over Bribery Case (Bloomberg) -- Glencore Plc was ordered by a federal judge in New York to pay $700 million as a criminal punishment for a global bribery scheme orchestrated by the Swiss-based commodities trading and mining giant.Most Read from BloombergElon Musk Regains His Spot as the World's Richest PersonHow to Get a Free Flight to Hong Kong in . Then, as now, a key factor was the intervention of the exchange. Some aggrieved traders are already preparing to take legal action against the exchange. By now, the entire nickel industry was in crisis. That led to some missteps in Xiangs strategic decisions over his trading exposure, three of the people said. Your email address will not be published. Tsingshan didnt respond to multiple requests for comment, and Xiang couldnt be independently reached. The price was frozen, below the record high but still at $80,000 a ton. 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