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Others took to social media. Matthew Chamberlain, the LMEs chief executive officer, had stayed up to watch. At the time of the LME's trading halt, nickel had gained more than 230% in March. (This account of events in the nickel market is based on dozens of interviews with people involved, many of whom requested anonymity because the matters are private.). That could either result in a huge loss for Tsingshan or the sale of a more than 60 percent stake in the companys Indonesian nickel mine and interest in its industrial park in the southeast Asian country, the report said. (By Jack Farchy, Alfred Cang and Mark Burton, with assistance from Sridhar Natarajan), Your email address will not be published. Glencore Mine Raglan Feb 2014 - Mar 2018 4 years 2 months. All Rights Reserved. Anyone using the LME needs to understand that. The LME at the end of the day is a physical metal market, he says. 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. 1. Harjavalta nickel smelter in Finland (Credit: Boliden). He said UBS . Xiangs short position has now racked up billions of dollars in losses. Those 18 minutes will haunt me, says the executive, who wasnt authorized to speak publicly. The seeds of the epic short squeeze were sown last year, when nickel, like all commodities, was rallying from its Covid-era low. 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 . Then on March 7, nickels price began its parabolic ascent, surging from $US30,000 a tonne to more than $US50,000. But while the short squeeze has weighed on Tsingshans short-term cash flows, strong nickel prices are to its advantage in the long run. 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. Beijing is supportive of him, Xiang told contacts recently. As the trend towards e-mobility grows, this versatile metal is increasingly needed to produce high-performance batteries. Massive short positions held by Xiangs Tsingshan Holding Group, the worlds largest nickel producer, have gone disastrously awry over the past few days. Project manager for transition of Sudbury INO from CAMP to Deswik. Glencore is a leading producer and marketer of nickel, as well as a recycler of nickel-containing materials such as batteries. Stephen Engle reports. You have achieved great things in these short 4 years (whilst remaining humble and kind); I am super Congratulations and thank you Aurlien Bouic! By early this year, it had taken ownership of more than half of the available nickel in LME warehouses. 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. At the current price of nickel, the brokers themselves wouldnt be able to pay their margin calls, they told the LME. 92 132 MT. But while the short squeeze has weighed on Tsingshan's . As the price rose through the London day after offices in Asia had closed, Tsingshan started struggling to pay, the people say. In this position, you will be responsible for the drafting of sales and purchase contracts and related legal documents. Xiang isnt just a financial trader making paper bets on price moves. Exchanges sometimes cancel trades when technology glitches or fat fingers cause one-off mistakes. Our fundamental responsibility is market stability, he said. Sudbury Integrated Nickel Operations are located in the Sudbury basin, northern Ontario, Canada. 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. Like Comment Share. 5 000 MT. The LME convened its special committee, a small group of metals and legal experts with the power to issue emergency rules for the market. 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 Chinese government may also play a role. Sr. Exploration Geologist CMDIC Collahuasi 2006 - 2007 1 year. Including positions on the London Metal Exchange and bilateral bets with banks, Xiang still has short holdings in the region of 150,000 tons, the people said. Glencore's Koniambo mine is located in New Caledonia, mining nickel in this French territory in the South Pacific. 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 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. Just after 6 a.m., the price of nickel passed $100,000 a ton. 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. But while the short squeeze has weighed on Tsingshans short-term cash flows, strong nickel prices are to its advantage in the long run. The metal is found in all our homes as a key ingredient of stainless steel. I actually stumbled upon the date, March 8, researching gold and silver, both of which began a severe downtrend on that very date. What does Tsingshan Group's rival, Glencore, do? But the obvious consequence of so much nickel hitting the market, he believed, would be a fall in its price. The prices that were being seen during that Asian session were becoming disconnected from, I believe, physical reality.. Those past scandals forced reforms on the exchange. 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. . For Xiangs big short position, that was painful. Tsingshan accounted for about half that amount. Poseidon Nickel stock opened the day at A$0.04 after a previous close of A$0.04. Bloomberg Daybreak Middle East. Golf's Greatest Holes: Golfing legend Paul McGinley takes television presenter Chris Hollins on a tour of the best golf courses in Ireland and Northern Ireland. Glencore Nickel. The dollar hit a one-week low earlier Wednesday after China's yuan gained. 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. Chinese nickel heavyweight Tsingshan Holding Group was looking at an $8 billion trading loss after nickel prices suddenly exploded higher following Russia 's invasion of Ukraine, The Wall Street . Required fields are marked *. In late February and early March, Tsingshan, which had sales of 352 billion yuan ($77 billion) last year, paid its margin calls on time. Not everyone shared his pessimism about prices. Glencore has a short interest ratio ("days to cover") of 0.2, which is generally considered an acceptable ratio of short interest to trading volume. Most market participants expect nickel prices to come back down once the crisis around Xiangs position has been resolved. This suggests a possible upside of 27.1% from the stock's current price. Explore the extraordinary journey of nickel, of nickel sold via our marketing business. Earlier this week, nickel prices in London spiked byas much as 250%in little more than 24 hours. MT. Last modified on Wed 15 Feb 2023 06.23 EST. Cobalt. But its obligations dwarfed its available cash and bank credit. People forgot that this isnt a video game retailer; its an important physical commodity. Its not just a casino.. 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. Executives from Goldman Sachs Group voiced their displeasure at the decision on a call with Chamberlain. 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. Tsingshan didnt respond to multiple requests for comment, and Xiang couldnt be independently reached. The head of one London metals brokerage recalls feeling sick as he watched the moves, realising what the spike in prices would mean for his company, the market, and the global metals industry. In late February and early March, Tsingshan, which had sales of 352 billion yuan ($56 billion) last year, paid its margin calls on time. Complete Glencore PLC ADR stock information by Barron's. View real-time GLNCY stock price and news, along with industry-best analysis. 21 962. 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. At that time of day, bleary-eyed traders are typically just glancing at prices as they swig coffee on their way to the office. On this day, however, metal traders were glued to a screen, watching the price action on the electronic market, which was already open to accommodate Asian trading. Glencore Nikkelverk is an important part of the green shift. Tsingshans nickel doesnt match the grade used in settlement on the LME, so the contracts arent a perfect hedge. It was a classic short squeeze, as the pain for Tsingshan, its brokers, and other shorts created a self-reinforcing cycle. 1w. 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. 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 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. 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. Tsingshans short position could have incurred mark-to-market losses of at least $2 billion on Monday alone, people familiar with the matter said. The penalty is part of the $1.5 billion Glencore agreed to pay to resolve bribery and market-manipulation probes in the US, UK and Brazil. This matters beyond the cozy world of . Most analysts sided with Xiang, at least in the medium term, believing that nickel productionled by Tsingshan and its competitors in Indonesiawould outpace demand. 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. Now, the traders watched with a mixture of horror and grim fascination as the price went skyward. The exchange had serious concerns about the ability of market participants to meet their resulting margin calls, raising the significant risk of multiple defaults. Despite that, Chamberlaininsisted to Bloomberg TVon March 9 that the solvency of the LME itself was never in doubt. The two major mining companies in Sudbury are working together to . It was 5:42 a.m. on March 8 in London when the nickel market broke. Vale and Glencore announced today that they've entered a partnership to begin a feasibility study to explore Nickel Rim South. 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. That put Tsingshans banks and brokers, which includeJPMorgan Chase,BNP Paribas, andStandard Chartered,in a bind. 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 . Some aggrieved traders are already preparing to take legal action against the exchange. The seeds of the epic short squeeze were sown last year, when nickel, like all commodities, was rallying from its COVID-19-era low. Some market rumors are circulating that Glencore might squeeze Tsingshan on LME Nickel for its 60% stake in a nickel mine in Indonesia. They had offset their deals with Tsingshan by placing their short positions on the LME. But its extremely unusual for an exchange to cancel whole sessions of trading after the fact. It is owned and operated by Glencore Canada Corporation.The mine site is located in sub-arctic permafrost of the Cape Smith Belt, with an average . Remember, when prices move up, traders such as Xiang who have sold futures contracts face margin calls; they must put up more cash to cover potential losses. Tsingshans nickel doesnt match the grade used in settlement on the LME, so the contracts arent a perfect hedge. 39 000 MT. 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