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China's Tsingshan enters deal with bankers to resolve nickel trade position

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China's Tsingshan enters deal with bankers to resolve nickel trade position

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LME to reopen nickel trading March 16

Nickel prices on LME crossed $100,000/mt, halting trade

  • 작성자
  • Staff
  • 편집자
  • Kshitiz Goliya
  • 원자재
  • 금속
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  • Nickel

China's Tsingshan group, the company in the center of a historic short squeeze on the London Metal Exchange in the week to March 11, said March 15 that it had reached a deal with its bank creditors that would buy the company time to resolve its trading position that forced the LME to halt nickel trading.

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Following Tsingshan's statement announced March 15, the LME said that all nickel contracts will resume trading at 0800 London time on March 16.

The LME suspended nickel trading in the early trading session on March 8 after prices more than doubled, breaching $100,000/mt mark and briefly reaching a record high of $101,365/mt.

The exchange outlined new curbs on trading to prevent wild swings in the future, including daily price limits across all base metals.

Tsingshan's statement meant it may be able to avoid pressure to make further margin calls and hence lower the risks of getting short squeezed again after the LME reopens trading, market sources said.

Under the standstill agreement, Tshingshan and the consortium of banks will be in discussions aimed at providing a standby secured liquidity facility intended principally for Tsingshan's nickel margin and settlement requirements.

As part of the deal, the participating banks have agreed not to close out positions against Tsingshan or make further margin calls in respect of existing positions, Tsingshan said in the statement.

"As an integral feature of the agreement, there is provision for the existing hedge positions to be reduced by the Tsingshan group in a fair and orderly manner as abnormal market conditions subside," the company said.

The industry was closely observing the reopening of nickel trading on the LME and how Tsingshan will reduce its existing hedge positions.

Tsingshan's size of trade has not been publicly disclosed.

Tsingshan -- the world's leading stainless steel and nickel producer -- has managed to gather enough spot material in the form of nickel plates to settle with the LME, China's Securities Daily reported March 9.

Sources were skeptical about this, terming it difficult to gather this much volume in such a short time as China is not a large electrolytic nickel producer.

Only electrolytic nickel can be traded both on the LME and the Shanghai Futures Exchange.

The most-active nickel contract for April delivery on the SHFE closed at Yuan 216,490/mt ($33,948/mt) March 15, up 4.7% from the previous settled price after declining for two straight days, SHFE data showed.

Market sources expected tightening supply of electrolytic nickel to lend some support to domestic prices in the near term. However, downstream consumers were waiting for the nickel prices to return to a reasonable range after the sharp increase.