Wen | Wang Yingchun Wang Ying
Edited | Wang Lifeng and Lu Ling
Under pressure, the London Metal Exchange (LME) announced the suspension of nickel trading until 11 March.
LME announced on March 9 that it has not yet set a date for the resumption of trading in Lun Nickel, and it is not expected to restart Lun Nickel trading before March 11, and a series of price limit measures will be adopted for the restart, such as a 10% limit on the rise and fall.
"In the history of Chinese and foreign securities and futures trading, such a method is rarely used to deal with it, indicating that the fluctuation of nickel in the futures period is too abnormal." Analysts point out.
Previously, the exchange announced the cancellation of all nickel trades executed on or after 0:00 a.m. UK time on or after 0:00 a.m. UK time and the LME select screen trading system. The cause of the incident was the sharp rise in the price of nickel and the resulting explosion of some investors. On March 8, the LME nickel contract opened from $49.98 million to a high of $101,365, a maximum increase of more than 100%.
On the evening of March 9, just when the market was worried about the big bear Qingshan Holdings, it responded that replacing the domestic metal nickel plate with high-ice nickel had been allocated to sufficient spot through various channels for delivery.
Nickel, at first widely used in the production of stainless steel. In recent years, the demand has mainly come from the field of new energy vehicles. The addition of nickel ternary lithium batteries, can greatly improve the energy density of power batteries, with the great development of the new energy automobile industry, lithium battery market greatly expanded, therefore, the market demand for nickel increased.
Tesla's Musk has pointed out that the scarcity of nickel is one of the biggest obstacles to increasing the production of electric vehicle batteries.
Nickel that is out of touch with fundamentals
The contradiction between supply and demand is one of the driving factors for this round of nickel price increases. "Inventory, at the same time last year, Lun nickel inventory was 260,000 tons, this year only more than 70,000 tons, on March 7 Lun nickel inventory fell to 76,800 tons, demand rose and inventory seriously reduced, directly promoted the price of Lun nickel." Wang Yanqing, a senior researcher of non-ferrous metals at CITIC Construction Investment Futures Co., Ltd. (hereinafter referred to as "CITIC Construction Investment Futures"), told Caijing reporters.
The Nickel Industry Branch of the China Nonferrous Metals Industry Association wrote on March 8 that "under the trend of continuous growth in nickel production, the growth is the NPI (including nickel pig iron) in the secondary nickel, while the first-class nickel that can be traded is declining." Electrolytic nickel traded in LME and NPI that blossoms in Indonesia are two different commodities, with only a few crosses in downstream applications. ”
"On the other hand, geopolitical risk has become the fuse of the price change of Lun nickel," Wang Yanqing commented. Russian nickel ore reserves account for about 10% of the world, not all nickel ore forms can enter the futures trading, from the historical data, Russia participates in futures trading every year nickel ore accounted for about 20% of the world.
Market investors' fears that LME could ban Russian nickel from physical delivery of futures are also heating up. "This makes the already reduced inventory even tighter." Wang Yanqing commented.
Despite this, the soaring price of nickel is still considered to be out of touch with fundamentals and reduced to a game of money. The non-ferrous metals team of Everbright Futures pointed out that although geopolitics is the driving factor, the malicious squeezing of overseas positions is the main driver. Short-term nickel price performance has been far from fundamentals.
"The rally in nickel has been driven by fundamentals, but it has also deviated from the fundamentals." Wang Yanqing analyzed the reporter of Caijing.
Market participants pointed the spearhead of LME nickel's surge to "forced positions". However, this conclusion has not yet been confirmed.
Signs of a rise in nickel have already appeared as early as January this year, and the increase is more moderate. "The abnormal performance of March 7 and 8 cannot be fully explained by the logic of supply and demand. Because there are no major events in these two days, this kind of change is likely to be the result of capital promotion, and the bulls choose the opportunity to force the bears to take a position. Wang Yanqing judged.
There is news in the market that the domestic company Tsingshan Holdings has accumulated a large number of short positions in the LME nickel derivatives market to hedge its possible price decline risk in the nickel production process, and it can be forced by global commodity traders. There are even market rumors that Glencore, a global commodities trading giant, can be a key counterparty.
According to public information, the predecessor of Tsingshan Holding Group is Zhejiang Fengye Group, founded by founders Xiang Guangda and Zhang Jimin in 1992, and is one of the earliest private enterprises engaged in stainless steel production in China.
The positions of each company's futures trading are confidential commercial information, and it is impossible for the company involved to voluntarily disclose the positions, and foreign positions are more opaque than domestic positions. "Traders will bump into each other and chat and inquire, and it can always be estimated that the positions held by Tsingshan Holdings on the London Stock Exchange should have been collected by opponents with ulterior motives." A market person explained to the "Finance" reporter.
Since futures are margin trading, once the position is blown up, all the margin will be completely lost or even need to be added. In the case of the price change of Lun nickel, if Qingshan Holdings does hold a large number of short positions, it is very likely to burst the position, and the loss is inevitable. "But how likely the loss is is not certain, first of all, the London Stock Exchange has declared the March 8 transaction invalid, which provides a great space for the problem to be solved, and Tsingshan Holdings may negotiate with the bulls about a loss amount acceptable to both parties, but it is almost impossible to fully admit compensation." A market person analyzed.
It is unclear how much risk the rising price of Lun Nickel will be to Tsingshan Holdings. However, Xiang Guangda behaved easily in an interview with the media, saying that at present, "there is no problem with positions and operations, foreigners do have some moves, and relevant state departments and leaders are very supportive of Qingshan."
A super empire of hidden commodity trading
The short-selling incident caused by the surge in nickel has once again pushed Glencore to the forefront of public opinion. Some media reported that Gleneng led this round of nickel short-selling market. However, some futures market participants believe that the collective behavior of some commodity traders led to the occurrence of this short-selling event.
In addition, on March 8, Glencore also publicly responded that "the above statements are completely total nonsense."
However, it is undeniable that Glencore is a presence that cannot be ignored for those engaged in commodity trading, with a wide global influence in the field of commodities, and has been likened by the media to "Goldman Sachs in the financial world".
Founded in the 1970s of the last century, Glencore has evolved into a global commodity trading giant after more than 40 years of development, which has formed a three-wheel drive business structure of metal minerals, energy and agricultural products. At present, Glencore has global pricing power for zinc and cobalt, which has a certain influence on copper prices.
According to public reports, Glencore's development and growth process has included the ambition and boldness of the founder "King of Oil" Mark Ritchie, and the expansion strategy of the second generation of management led by Grassenberg, which is indispensable to the development of Glencore.
Mark Ritchie, a Belgian Jew known as "the most controversial international businessman of the 20th century," was a 17-year-old U.S. wanted criminal.
His successor, Grassenberg, served as CEO from 2002 and remained in power for 20 years until his retirement in June 2021. His appointment coincided with China's accession to the World Trade Organization and its rapid economic take-off. China's vast infrastructure and real estate construction have fueled a global commodities boom, and Glassenberg has seized the opportunity.
During this period, Glencore has completed the transformation from an asset-light model of bulk trade to an asset-heavy model of acquiring upstream mineral resources through continuous mergers and acquisitions of metal minerals, coal mines and oil fields. Through a series of huge mergers and acquisitions, Glencore has tried to rewrite the industry pattern and the rules of the game, and has established a wide range of influence in many fields.
In order to prepare the funds needed for M&A and business development, Glencore is listed in London, Frankfurt and Hong Kong. However, due to the sluggish global commodities downturn after 2015 and dismal performance, Glencore was eventually delisted from Hong Kong in January 2018. The total market value is currently 62.8 billion pounds (about 520 billion yuan).
Despite its huge global influence, Glencore's performance is not so ideal from the performance point of view, and its net profit shows obvious cyclical fluctuations.
In 2015, for example, Glencore lost a huge net profit of RMB32.234 billion (converted at the then-time exchange rate) due to a sharp decline in global commodity prices. Subsequently, Glencore successively announced the reduction of copper and zinc production in the second half of 2015, prompting global copper and zinc prices to rise sharply, and the price recovery prompted Glencore's net profit to turn into a profit of 9.566 billion yuan in 2016 and expand its profit to 37.748 billion yuan in 2017.
From 2012 to 2020, Glencore made almost as much profit as it lost during the period.
However, in time for the global bull market in oil, copper and other commodities that began in November 2020, investors are actively optimistic about Glencore's performance. Since then, Glencore's total market capitalization has more than tripled.
Nickel industry chain stocks are almost completely lost
As the price trend of Lun nickel on March 7 and 8 exceeded market expectations, market participants reminded that the risk of fluctuations in the bilateral market of Shanghai nickel will increase in the next step. On the other hand, Western sanctions against Russia have led to the short-term inability of Russian nickel to participate in futures trading, and Russian nickel spot exports to the European and American markets have also been blocked by currency sanctions. Market participants expect that the next step of Russian nickel will be exported from Europe and the United States to export to China, which will bring about the expectation of an increase in domestic nickel supply, which will make the price difference between the inside and outside disks continue to exist.
CITIC Futures Research Department non-ferrous group reminds: From the perspective of the domestic market, due to the extreme negative price difference of Shanghai-London nickel, the sharp rise of Nickel-Lun promotes the passive rise of Shanghai nickel, and once Lun Nickel turns downward, this will undoubtedly increase the risk of bilateral fluctuations of Shanghai nickel, investors need to pay attention to domestic and foreign market differences, cautiously participate in market transactions.
The abnormality of Lun nickel has affected the surrounding non-ferrous metals, and the price fluctuations of the non-ferrous disk surface at home and abroad are obvious. According to the Minmetals Futures Nonferrous Metals Group, investors are advised to wait and see in the short term.
It is understood that in addition to Tsingshan Holdings, there are many listed companies in the current layout of the nickel industry chain, such as Huayou Cobalt (603799. SH), Luoyang Molybdenum (603993. SH), Ewell Lithium Energy (300014. SZ), Grammy (002340. SZ), Zhongwei Shares (300919. SZ), CATL Era (300750. SZ) and so on.
In 2018, Huayou Cobalt established a joint venture company to invest in the construction of a battery electric nickel project in Qingshan Park, a comprehensive industrial park in Indonesia, China. The following year, Luoyang Molybdenum also joined the project. In recent years, Guangdong Bangpu, Yiwei Lithium Energy, Grimme and Zhongwei Shares, subsidiaries of CATL, have all come to Qingshan Park to build factories and invest.
Following the sharp decline in Huayou Cobalt on March 8, the stock fell directly to a halt on March 9; after falling for three consecutive trading days, the stock fell again by 3.85% on March 9; Ewell Lithium Energy has been sluggish since it turned into a decline on November 30, 2021, and the stock price has been falling from a high of 152.9 yuan per share for more than 3 months to a price of 70.49 yuan per share at the close of March 9; Grammy fell another 6.53% on March 9 after four consecutive trading days of decline. Zhongwei shares also performed rather dismally, falling another 2.63% on March 9 after falling for six consecutive trading days.
Among the above-mentioned nickel industry chain related stocks, CATL has the largest market value, and its performance is slightly different from the above stocks, falling in the first 6 trading days and rising 3.96% against the trend on March 9.
However, it is worth noting that in the case of the general decline in the A-share market, the precious metals sector on March 9 still rose by 1.45%, and since January 28, 2022, the precious metals sector has risen for many consecutive days, and the rally is obvious.
Will the rolling of nickel be the last?
Lun nickel soared, the market was short, resulting in a huge loss of Tsingshan Holdings, which also caused people to think more.
The short position of Qingshan Holdings, as early as February this year, there were foreign media to do relevant reports, a month later, finally became a tragedy. Why did Tsingshan Holdings not correct it in time, and was its hedging strategy appropriate?
In this regard, a senior person in the futures market told the "Finance" reporter that judging whether its trading strategy is appropriate depends on two levels, one is whether the products used for hedging can match the physical delivery requirements of the London Stock Exchange. The delivery specifications of Lun Nickel are relatively high, and the nickel inventory on the market to meet the delivery demand of Lun Nickel is actually limited. Tsingshan Holdings' nickel is mainly suitable for the production of stainless steel. Second, whether the position used for hedging matches the volume of the market warehouse receipt.
"A strategy with better risk control needs to match the overall number of warehouse receipts in the market, and if it occupies a large share of the market, it is easy to be attacked." Judging from the rumors in the market, Tsingshan Holdings has a large short position. The above-mentioned futures market veteran said.
This is not the first commodity trading tragedy in China. It is understood that in the past 20 years, there have been several cases of international capital giants hunting Chinese enterprises, of which the Zhuzhouzhi refinery was forced to empty by international speculators in 1997.
Zhuzhou Smelter (hereinafter referred to as "Zhuzhou Smelting"), now Zhuzhou Smelting Group, was once the largest lead and zinc producer in China. China's first zinc brand "Torch" registered on the London Stock Exchange was from Zhuye. In order to lock in the future sales price of the "torch" and prevent the price from falling, Zhuye carried out short hedging on the London Stock Exchange.
The personnel who trade zinc futures for Zhuye have overstep their rights on the London Stock Exchange, and the short-selling positions in the zinc futures contract far exceed the original planned trading scale. This matter was noticed by the international speculators and forced to take a position. After the battle, Zhuye held a short position of 450,000 tons of zinc on the London Stock Exchange, but Zhuye's actual annual output was 300,000 tons. "Can't get out so many spot, speculators force you to pay, and finally the state used the national force to hand over the position, closed a part of the position, since this incident, Zhuye Yuanqi was seriously injured, and the competitiveness was lost." Sun Lihui, director of the Chamber of Commerce for Import and Export of Minmetals Chemicals, recalled in an interview with Caijing reporter.
In the wake of the Zhuye incident, there have been a number of incidents in recent years in which international speculators have attacked Chinese companies through the futures market, such as the "China Aviation Oil" incident in 2004, in which the injured China Aviation Oil Company (Singapore) applied to the court for bankruptcy protection after being forced to lose $550 million.
In the "National Reserve Copper" incident that occurred in 2005, the State Material Reserve Bureau was forced to empty by international speculators, although the final loss was not disclosed to the public, but at the end of that year, Liu Mingkang, chairman of the China Banking Regulatory Commission, publicly stated: Due to the lack of effective control of market risks, the State Reserve Bureau accounted for heavy losses in this incident.
In addition, the "crude oil treasure" incident in April 2020 made investors suffer losses. In the view of market participants, the reflection behind the incident reflects that the risk control awareness of Chinese investors needs to be improved urgently, which includes institutional investors and also includes the majority of individual investors. (Caijing reporter Huang Huiling also contributed to this article)