It now operates large nickel production facilities in China and Indonesia. 1w. It was a classic short squeeze, as the pain for Tsingshan, its brokers, and other shorts created a self-reinforcing cycle. The LMEs history dates back to the early 19th century, when metal traders drew a circle in the sawdust on the floor of the Jerusalem Coffee House in the City of London. The company has assured creditor banks in China that its . For most of the past decade, theyd traded between $US10,000 ($13,700) and $US20,000. The prices that were being seen during that Asian session were becoming disconnected from, I believe, physical reality.. Still, the LME has weathered numerous scandals before in its 145-year history, from a 1985 crisis in the tin market that caused many brokers to go out of business to the incident when a trader at Sumitomo hid more than $US2 billion in losses. By now, the entire nickel industry was in crisis. Already at an all-time high by 5:42 a.m., it lurched higher in stomach-churning leaps, soaring $30,000 in a matter of minutes. Perth, Western Australia, Australia. Nickel is also used in certain types of steel which lower magnetic properties. 2W - 6W. He started increasing his short position on the London Metal Exchange. It was 5.42 am on March 8 in London when the nickel market broke. Learn how we produce copper and the uses it is put to. Mark Hansen, chief executive officer of Concord Resources. Now they had to pay big margin calls on the exchange while receiving no margin from their client. The Nikkelverk Operations. The LME made a near-unprecedented decision. 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. Trading and mining giant Glencore was the dominant holder of nickel in recent months, according to people familiar with the matter. Like Comment Share. 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. Baar, Switzerland 29 July 2022. This suggests a possible upside of 27.1% from the stock's current price. You will be able to view the post at https://dtmagazine.com/money724-302022.php#wrap in the Precious Metals section. . Then came a geopolitical crisis that caught him unawares. But Xiang must now decide what to do with those positions, which give him outsize influence on the price of a metal used in everything from electric-vehicle batteries to stainless-steel kitchen appliances. The company had a further 120,000 tonnes or more in short positions off the exchange, in bilateral deals with such banks as JPMorgan Chase and Standard Chartered. Mark Hansen, chief executive officer of Concord Resources, Help using this website - Accessibility statement. The fallout was immediate. 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. Our positions and operations dont have any problems, Xiang Guangda, who is also the Wenshou-based companys founder, told Yicai Global yesterday. Others took to social media. 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. Nickel. At that time of day, bleary-eyed traders are typically just glancing at prices as they swig coffee on their way to the office. They had offset their deals with Tsingshan by placing their own short positions on the LME. 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. Why bet against nickel when you have a nickel business? The LME at the end of the day is a physical metal market, he says. The prices that were being seen during that Asian session were becoming disconnected from, I believe, physical reality.. Its not just a casino.. Executives fromGoldman Sachs Group Inc.voiced their displeasure at the decision on a call with Chamberlain. Undeterred, the Chinese tycoon has told banks he wants tomaintain his position, and has asked them to keep funding him despite the losses. Harjavalta nickel smelter in Finland (Credit: Boliden). 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. 20 kt/a nickel in concentrate) and Fraser Morgan (ca. In this position, you will be responsible for the drafting of sales and purchase contracts and related legal documents. Long Term . WATCH: The Chinese tycoon, known as Big Shot in commodities circles is said to be facing billions of losses. Hansen of Concord Resources argues that financial investors who traded nickel last week should have been prepared for the LME to step in. Bloomberg Daybreak Middle East. Glencore Headquarters. For most of the past decade, theyd traded between $10,000 and $20,000. Glencore Nickel. Some hedge funds were buying nickel contracts in a bet on the electric vehicle boom. Their GLEN share price forecasts range from GBX 540 to GBX 740. This was the most disorderly move in a metal Ive seen in my career, says Mark Hansen, chief executive officer of trading houseConcord Resources Ltd.We had a frenzy based on speculation that accelerated on Monday and Tuesday. Then on March 7, nickels price began its parabolic ascent, surging from $US30,000 a tonne to more than $US50,000. Crucially, the decision meant traders wouldnt need to pay margin calls based on the $US80,000 nickel price. Glencore Nikkelverk is an important part of the green shift. He blamed foreigners making some moves for nickels price spike in an interview with Chinese news outlet Yicai. 21 962. Source: LME. Required fields are marked *. 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. Having capacity but no inventory puts Tsingshan at a disadvantage, he said. Nickel prices usually move a few hundred dollars per ton in a day. 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. Tsingshan accounted for about half that amount. MINK. 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. That put Tsingshans banks and brokers, which include JPMorgan Chase, BNP Paribas, and Standard Chartered, in a bind. 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 is a leading producer and marketer of nickel, as well as a recycler of nickel-containing materials such as batteries. The metal is found in all our homes as a key ingredient of stainless steel. Then came a geopolitical crisis that caught him unawares. 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. 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. At that time of day, bleary-eyed traders are typically just glancing at prices as they swig coffee on their way to the office. A Glencore spokesman declined to comment. Xiang Guangda -- who controls the worlds largest nickel producer, Tsingshan Holding Group Co., and is known as Big Shot in Chinese commodity circles -- has closed out part of his companys short position and is considering whether to exit the wager altogether, the people said. 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. In theory, there should be two options for this 200,000 tons of nickel short order: 1. 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. All Rights Reserved. Most market participants expect nickel prices to come back down once the crisis around Xiangs position has been resolved. By now, Tsingshan wasnt the only nickel company that was strugglingjust the biggest. The Murrin Murrin Mine is a major nickel-cobalt mining operation being conducted in the North Eastern Goldfields, approximately 45 km east of Leonora, Western Australia.The project was initiated as a joint venture between Murrin Murrin Holdings Pty Ltd, a wholly owned subsidiary of Anaconda Nickel Limited (whose share was 60%) and Glenmurrin Pty Ltd, a wholly owned subsidiary of Glencore . Glencore is one of the largest miners in the world that supply copper and nickel, two of my essential CCLANGs for the future of electrification. Why bet against nickel when you have a nickel business? articles a month for anyone to read, even non-subscribers! Nickel prices usually move a few hundred dollars per tonne in a day. Nickel. Born in 1958, Xiang founded his business more than 30 years ago as a workshop making frames for car doors and windows in Wenzhou, eastern China. Yet the day before, the market had started to unravel, with prices rising by astunning66% to $48,078. Xiang isnt just a financial trader making paper bets on price moves. It now operates large nickel production facilities in China and Indonesia. Xstrata Nickel Montcalm Mine 2007 - 2010 3 years. The dollar hit a one-week low earlier Wednesday after China's yuan gained. The giant commodity traderGlencore Plcalso had a position on the LME that would benefit from rising prices. The Chinese government may also play a role. Mar 16, 2022 - 8.00am. Glencore Nikkelverk AS has a modern and complex processing system. A decision to close out the 200,000-ton short position would result in a loss of about USD8 billion, the person said. Xiang didnt believe the rally would last. It also highlights the risks of an opaque market where a handful of players play outsized roles, deciding how and where purchasers like global battery makers secure raw materials. The head of one London metals brokerage recalls feeling sick as he watched the moves, realizing what the spike in prices would mean for his company, the market, and the global metals industry. Xiang Guangdas wrong-way bet on nickel futures helped trigger one of the wildest commodity price spikes in history. Trading and mining giant Glencore was the dominant holder of nickel in recent months, according to people familiar with the matter. this week's short squeeze is nonetheless likely to push . 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. Chinese entrepreneur Xiang Guangda has been caught out by nickels price surge. Just after 6 a.m., the price of nickel passed $100,000 a ton. Mid Term. Four or five of the brokerages that are LME members would have failed, a shock that could have devastated the global metals industry. Nickels price moved sharply higher in the week after Russias invasion. Required fields are marked *. Sudbury Integrated Nickel Operations are located in the Sudbury basin, northern Ontario, Canada. Nickels price moved sharply higher in the week after Russias military invasion. Then, as now, a key factor was the intervention of the exchange. 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 . Vale - 208,000 metric tonnes. Nickel Rim South Mine. Tsingshan has recently threatened in Chinese domestic media to deliver physical metal to the LME, a strong-arm tactic that analysts say would push prices back down. 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. 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 . Since 1910, nickel and other metals have been refined, produced and exported from the production plant in Kristiansand. 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. For participants in commodities exchanges, a price rally is not necessarily good news. 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. 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 . UNFORGIVEABLE,tweetedMark Thompson, a former trader at Trafigura and Apollo. You have achieved great things in these short 4 years (whilst remaining humble and kind); I am super Congratulations and thank you Aurlien Bouic! Not everyone shared his pessimism about prices. 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 total volume mined by Glencore in 2021 fell compared to 2020, in part due to supply chain problems and the closure of some mines. Furious investors and traders. 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. . 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