15 March 2022 – The LME has announced its intention to resume nickel trading on 16 March 2022. Tsingshan founder disempowered? Group may no longer trade nickel for the time being. SHFE nickel continues its upward trend. And new corona lockdowns in China.
LME nickel trading to start on 16 March 2022
The LME has announced that nickel trading will resume at the start of trading on 16 March 2022. The price for the restart is to be the closing price on 7 March 2022.
The nickel price was around $42,200 per tonne for the LMEselect 3-month contract before market speculation triggered by the Tsingshan Group, among others, sent the price soaring to over $100,000 per tonne. The LME then suspended trading in nickel for more than a week.
As an additional measure arising from the extreme price fluctuations, the LME announced daily limits on price fluctuations for all base metals in the future.
Tsingshan founder disempowered? Banks prohibit TS nickel trading
The Tsingshan Group seems to have been hit harder by the failed nickel speculations than previously assumed. After some pithy tones from the Tsingshan founder in the last few days, the crisis managers now seem to have taken the helm.
State and banks had to rescue Tsingshan
Banks like China Construction Bank and J.P. Morgan were asked for help. J.P. Morgan seems to have been involved in the speculation incident to the tune of one billion dollars. The Chinese state also felt compelled to ask banks to extend the credit lines of the stainless steel and nickel producer Tsingshan in order to save the company and stabilise the market.
Tsingshan is no longer allowed to trade nickel for the time being
An agreement has now been reached between the banks and Tsingshan Group that, for the time being, the banks will not make margin calls or close out the producer’s nickel positions on the London Metal Exchange. At the same time, Tsingshan apparently had to give an assurance that the group would not be allowed to buy any more metal to cover its short positions for the duration of the standstill agreement. This was also an important basis for the LME to be able to resume nickel trading at all. Let’s hope that the group will stick to this agreement and stops its nickel trading.
Can Tsingshan be saved at all?
If that were not enough of an indication of Tsingshan’s financial difficulties, the commodity syndicate Castle Peak has now been asked for help to unwind the short positions of more than 150,000 MT of nickel held by the Tsingshan Group. However, it is unclear whether Castle Peak can get to grips with the huge problem that has accumulated there.
What will happen to the giant Tsingshan?
It also remains to be seen what will happen to the Tsingshan Group’s joint ventures in Asia and internationally. Unscathed, the group will certainly not survive the possible loss of about 8 billion US dollars. And the previously so pithy tones and declarations of war by Big Shot have fallen silent. So the question is whether the company’s founder had a change of heart or was simply deprived of his power in order to avert the collapse of Tsingshan.
SHFE nickel on the rise
The nickel contract ni2204 on the SHFE closed today with a plus of approx. 4.7%. But all other nickel contracts traded on the SHFE were also up significantly. SHFE stainless steel futures continue to trend higher, up more than 1%. Chinese stainless steel spot prices also continue to rise.
New lockdowns in China
Corona pandemic containment measures are again reported from major economic and metropolitan regions in China. In particular, the cities of Hong Kong, Guangzhou and Shenzhen in Guangdong province are affected. Apple supplier Foxconn has also been forced to close temporarily due to quarantine measures. This could also have an impact on the almost 50 million tonnes of steel production in Guangdong province.
- EU sanctions against Russian steel exports
- Tsingshan had to be rescued by the state
- Europe’s aluminium industry under pressure
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