How Chinese #Nickel tycoon Xiang Guangda and his #Tsingshan Holding Group Co. got short squeezed

Bloomberg's Matt Levine breaks down the LME Nickel story and how Chinese nickel tycoon Xiang Guangda and his Tsingshan Holding Group Co. got short squeezed:

Nickel

We talked on Tuesday about a hedging problem for nickel producers. If you make nickel and the price of nickel goes up, you will make more money, one day at a time, as you sell your now-more-valuable nickel. Meanwhile if you have hedged your nickel production by selling nickel futures on a commodities exchange, and the price of nickel goes up, you will get a margin call from your broker demanding that you put up a lot more money right now. Your stock of nickel in the ground and in warehouses has become more valuable, but it is not easy to turn that all into ready money; your short position in nickel futures has moved against you, and that does require ready money. In the worst case, you run out of money and lose your business even as it is becoming more valuable.

There is a variation on this problem.

#Nickel Chaos Recalls #LME's Darkest Days

"Shambolic, shameful, scandalous, calamitous, ruinous or pick any word of your choosing. Today has been a shattering blow to all that love the LME and all those that use it to conduct their daily business."— Michael Marlowe, director at Hythe Bay Metals Ltd.

Incredible that the LME canceled all the trades done on Nickel yesterday to save some "market participants" !! $JPM #CCB 

LME Chief Executive Officer Matt Chamberlain defended the decision, saying that some brokers would have struggled if the nickel trades had stood. [!!!]

"It would have been extremely difficult for some of our market participants to continue their activities," Chamberlain said in an interview with Bloomberg TV. "The ability of the financial system to get that money to the members in London and then into the exchange I think would have been significantly stressed."

Read the whole story on Bloomberg  here: 

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https://www.bloomberg.com/news/articles/2022-03-08/metal-traders-reel-as-nickel-chaos-recalls-market-s-darkest-days

#LME Halts #Nickel Trading After Unprecedented 250% Spike

Big Shot, Big Short

Margin calls worth "Millions of Dollars" on Tsingshan's short positions were finally paid by a unit of #China Construction Bank Corp. CCB, which is one of Tsingshan's brokers. 

Prices surged to $100'000/Ton before LME halted trading. 

See the whole story in Bloomberg here:  LME Halts Nickel Trading After Unprecedented 250% Spike 

https://www.bloomberg.com/news/articles/2022-03-08/lme-suspends-nickel-trading-after-unprecedented-price-spike

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bit.ly/MasterMetals