Our analysis assumes the development of Onaping Deeps with production commencing in 2021 at a capital cost of $750 million. Bloomberg Daybreak Middle East. In theory, any price changes on the futures market should offset price changes in the value of the inventories as long as the traders can meet their margin calls. Anyone using the LME needs to understand that. 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. Sign up to get it every weekday morning. 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. 02 March 2023. Iquique Chile Falconbridge . They had offset their deals with Tsingshan by placing their own short positions on the LME. It is believed that Tsingshan has accumulated large short positions in nickel derivatives markets to hedge against possible price . The seeds of the epic short squeeze were sown last year, when nickel, like all commodities, was rallying from its COVID-19-era low. 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. He started increasing his short position on the London Metal Exchange. Glencore. Nickel prices usually move a few hundred dollars per ton in a day. While few observers believed Xiang could reach that level of production, he was confident. Glencore Mine Raglan Feb 2014 - Mar 2018 4 years 2 months. Then came a geopolitical crisis that caught him unawares. Those past scandals forced reforms on the exchange. We produce other metals as a by-product of nickel production, including cobalt, copper, precious metals and platinum-group metals. 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. articles a month for anyone to read, even non-subscribers! But its extremely unusual for an exchange to cancel whole sessions of trading after the fact. 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. Senior Mine Engineer. On this day, however, metal traders across the city were glued to a screen, watching the price action on the electronic market, which was already open to accommodate Asian trading. 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. In August 2021, Glencore increased its medium-term emission reduction target to a 50% reduction by 2035 on 2019 levels and introduced a new short-term target of a 15% reduction by 2026 on 2019 levels. Trading and mining giant Glencore was the dominant holder of nickel in recent months, according to people familiar with the matter. It was a classic short squeeze, as the pain for Tsingshan, its brokers, and other shorts created a self-reinforcing cycle. The LME halted trading of the metal yesterday and announced that it is unable to deliver on spot nickel contracts scheduled for March 9. The metal is found in all our homes as a key ingredient of stainless steel. The LME at the end of the day is a physical metal market, he says. (Podcast). Market speculation has it that Tsingshan has a short position of about 200,000 tons of nickel, which it cannot deliver due to a lack of spot product after being assailed and squeezed out by US and European commodity futures giants such as Glencore, China Securities Journal reported yesterday. But its obligations dwarfed its available cash and bank credit. Nickels 250 per cent 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 the London Metal Exchange (LME) to suspend trading for the first time in three decades. They had offset their deals with Tsingshan by placing their short positions on the LME. 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. (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.). Those moves sent nickel to a record high of more than $100,000 a ton on Tuesday beforetrading was suspended. Yet the day before, the market had started to unravel, with prices rising by astunning66% to $48,078. 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. I actually stumbled upon the date, March 8, researching gold and silver, both of which began a severe downtrend on that very date. The giant commodity traderGlencore Plcalso had a position on the LME that would benefit from rising prices. 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. Sr. Exploration Geologist CMDIC Collahuasi 2006 - 2007 1 year. As Contract Writer / Coordinator, you will be part of the Contract Team, which is a team within the Coal Department. Four or five of the brokerages that are LME members would have failed, a shock that could have devastated the global metals industry. Yet the day before, the market had started to unravel . 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. (By Jack Farchy, Alfred Cang and Mark Burton, with assistance from Sridhar Natarajan), Your email address will not be published. Xiang Guangdas wrong-way bet on nickel futures helped trigger one of the wildest commodity price spikes in history. 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. Sep 2021 - Present1 year 5 months. For most of the past decade, they'd traded between $10,000 and $20,000. 6 kt/a nickel in concentrate). But its obligations dwarfed its available cash and bank credit. Not everyone shared his pessimism about prices. 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. 2023 Glacier Media Group, All Rights Reserved. In the short term, apackage of loansfrom Chinese and international banks will help Tsingshan meet its immediate liquidity squeeze. 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. Glencore UK Ltd, Izimbiwa Coal (Pty) Ltd, Katanga Mining Limited, Kazzinc Ltd., Koniambo Nickel S.A.S., Magdeburg, Mangoola Coal Operations Pty Limited, McArthur River Mining Pty Ltd, Minera . Things seemed calm at first: Prices were hovering about $US50,000 a tonne, and he went to bed. Market speculation has it that Tsingshan has a short position of about 200,000 tons of nickel, which it cannot deliver due to a lack of spot product after being assailed and squeezed out by US and European commodity futures giants such as Glencore, China Securities Journal reported yesterday. Nickel prices usually move a few hundred dollars per ton in a day. Anyone using the LME needs to understand that. LME brokers and their clients were hit with margin call after margin call. Four or five of the brokerages that are LME members would have failed, a shock that could have devastated the global metals industry. In August 2021, Glencore increased its medium-term emission reduction target to a 50% reduction by 2035 on 2019 levels and introduced a new short-term target of a 15% reduction by 2026 on 2019 levels. Undeterred, the Chinese tycoon has told banks he wants to maintain his position, and has asked them to keep funding him despite the losses. The LME convened its special committee, a small group of metals and legal experts with the power to issue emergency rules for the market. Perth, Western Australia, Australia. 2W - 6W. On average, they predict the company's share price to reach GBX 620.91 in the next year. Glencore Nikkelverk AS has a modern and complex processing system. The difference is that nickel is a commodity that touches the entire global economy. . Nickel prices usually move a few hundred dollars per tonne in a day. Save my name, email, and website in this browser for the next time I comment. While few observers believed Xiang could reach that level of production, he was confident. Were sorry, this feature is currently unavailable. Shanghai's most-traded nickel futures contract . Miners, traders, and manufacturers often use the market to make short bets that is, to make money when prices fall. Trading and mining giant Glencore Plc was the dominant holder of nickel in recent months, according to people familiar with the matter. As the price rose through the London day after offices in Asia had closed, Tsingshan started struggling to pay, the people say. Wayne has over 20 years of operational management experience of complex hydrometallurgical plants, specialising in transformation of operational and . The discussions are ongoing, and its not clear what stance Tsingshans banks, which include JPMorgan Chase & Co. and China Construction Bank, will take. Credit: INF News.com. In late February and early March, Tsingshan, which had sales of 352 billion yuan ($77 billion) last year, paid its margin calls on time. Glencore Headquarters. 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. The Nikkelverk Operations. 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 . Canada Nickel Company Inc. $1.24. 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. Beijing is supportive of him, Xiang told contacts recently. The two major mining companies in Sudbury are working together to . 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. Feb 2021 - Dec 202111 months. At 1am on March 8, the market opened. Your password has been changed successfully. . Now, people familiar with the matter say, the exchange is likely to introduce such measures as position limits and greater transparency. He said UBS . 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. 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. Tsingshans nickel doesnt match the grade used in settlement on the LME, so the contracts arent a perfect hedge. Nikkelverk is committed to the principles of sustainable development, taking into account social, environmental and economic factors. 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. Executives fromGoldman Sachs Group Inc.voiced their displeasure at the decision on a call with Chamberlain. 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. But the effects of the short squeeze are likely to be felt in other ways. Its still unclear how much of a risk the nickel rally and a cash drain from topping up margin payments pose to the company. As the price rose through the London day after offices in Asia had closed, Tsingshan started struggling to pay, the people say. Just after 6am, the price of nickel passed $US100,000 a tonne. 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. Fastmarkets price assessment for nickel pig iron, high-grade NPI content 10-15%, spot, ddp China was 1,200-1,210 yuan . But the effects of the short squeeze are likely to be felt in other ways. Located in Kristiansand, Nikkelverk is the largest nickel refinery in the western world producing high-quality nickel and cobalt. They held a hurried call on Monday evening, but decided to allow the nickel market to continue trading. 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 fallout was immediate. By now, the entire nickel industry was in crisis. 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. By now, Tsingshan wasnt the only nickel company that was strugglingjust the biggest. Now they recognised that they had to suspend trading. Nickel. Hansen of Concord Resources argues that financial investors who traded nickel last week should have been prepared for the LME to step in. The seeds of the epic short squeeze were sown last year, when nickel, like all commodities, was rallying from its Covid-era low. Please try again later. Miners, traders, and manufacturers often use the market to make short betsthat is, to make money when prices fall. Xiang was aware of flaws in his strategy, people familiar with the matter said. Our marketing business markets nickel and nickel concentrates, as well as by-products and ferronickel. We produce some of the world's purest nickel. In discussions over loans this week, Xiang told bankers hes confident his company can meet its obligations, according to people familiar. Trafigura Lines Up Russia Aluminum Deal in Challenge to Glencore. The price was frozen, below the record high but still at $US80,000 a tonne. Tsingshan didnt respond to multiple requests for comment, and Xiang couldnt be independently reached. Explore the extraordinary journey of nickel, of nickel sold via our marketing business. 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. Lurched higher in stomach-churning leaps, soaring $ 30,000 in a day for the next year Tsingshan wasnt only. Tonne in a day tonne, and manufacturers often use the market.. Call with Chamberlain effects of the day before, the price rose through the London metal exchange LME halted of. 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