Last week's nickel trade on the London Metal Exchange ("LME") will be a classic case of short-selling, with the two sides of the 2021 Fortune Global 500 list of 21st swiss GLENCORE and 279th unlisted private enterprise From Wenzhou, Tsingshan Holdings.
Warring parties
Glencore is a global commodity trading giant, founded in 1974, headquartered in Bar, Switzerland, Glencore's global market operations department has more than 50 offices in more than 40 countries, employing more than 2,000 people; industrial operations department in 13 countries to open 15 factories, employing more than 50,000 people, in 2020, Glencore annual production of 1.26 million tons of copper, cobalt production of 27,000 tons, nickel production of 110,000 tons, zinc production of 1.17 million tons, respectively, accounting for about 5.5%, 21.6% of the global total output, respectively. 4.4% and 8.5%, it is the world's largest producer of zinc and chromium, the third largest producer of copper ore, the fourth largest producer of nickel, and one of the largest coal producers in the world.
Founded in the 1980s by Wenzhou businessman Xiang Guangda, Tsingshan Holdings has formed five major group companies with more than 300 subsidiaries. Tsingshan Holdings, which started out in stainless steel, has won the right to mine nickel resources in Indonesia and the mining right of chrome ore in Zimbabwe in 2008, becoming one of the world's largest producers of nickel iron. According to the company's disclosure, its nickel equivalent production will reach 600,000 tons in 2021, 850,000 tons in 2022, and 1.1 million tons by 2023, with Tsingshan Holdings having an 18% global nickel market share in 2020. The high ice nickel produced by Qingshan Holdings is produced by adding a vulcanizing agent to the nickel iron and blowing it, which can be obtained through further treatment to obtain nickel sulfate or electrolysis to obtain final products such as metal nickel. What can be LME is the electrolytic nickel with the grade of Ni9996, according to the provisions of the national standard GB/T6516-1997, of which the total amount of nickel and cobalt is not less than 99.96%, and the cobalt content is not more than 0.02% of the high-purity nickel.
The beginning and end of the event
In order to combat the fluctuation of nickel prices, Aoyama hung a nickel short order of 200,000 in LME, the price was 20,000 US dollars, March 9, 2022 was the final delivery date, the original storm was quiet, but who knew that in the first few days of the delivery date, the price of futures nickel once soared to 100,000, so Aoyama either needed to pay money, or needed to deliver, but the previous also said that although Qingshan can produce 600,000 tons of nickel per year, but it is high ice nickel instead of high purity nickel recognized by the exchange, according to the market price at that time, Aoyama lost $12 billion, and at this time stall, LME pulled the website to postpone the delivery time and cancel the transaction after March 8, which surprised the bulls in the market.
The LME has been monitoring the impact on the LME market of the situation in Russia and the Ukraine, as well as the recent low-stock environment and high pricing volatility environment observed in various LME base metals and in particular Nickel. With immediate effect, and following the suspension of the LME Nickel market announced in Notice 22/052, the LME (acting where required through the Special Committee) has determined that it is appropriate in the circumstances to take the following actions in respect of physically settled Nickel Contracts: (i) cancel all trades executed on or after 00:00 UK time on 8 March 2022 in the inter-office market and on LMEselect until further notice (Affected Contracts); and (ii) defer delivery of all physically settled Nickel Contracts due for delivery on 9 March 2022 and any subsequent Prompt Date in relation to which delivery is not practicable (as determined by the LME and notified to the market) owing to a trading suspension in line with the process in this Notice.
LME considerations
London Metal Exchange (LME, full name London Metal Exchange is the world's largest non-ferrous metals exchange, founded in 1876, trading varieties of copper, aluminum, lead, zinc, nickel and aluminum alloys, the price and inventory of the exchange has an important impact on the world's non-ferrous metal production and sales. HKEX announced its acquisition of LME in June 2012 for £1.388 billion (approximately HK$16.67 billion), which was formally completed in December of that year.
For this cancellation operation, Li Xiaojia, former chief executive of the Hong Kong Stock Exchange, said in an interview with foreign media that the cancellation of all nickel transactions executed by the London Metal Exchange (LME) on March 8 was a decision made by the LME clearing house based on the transaction clearing rules, so it did not violate the relevant regulations. At the same time, if the transaction continues, there will be a large number of trading participants to blow up, and the final transaction will not be completed, and the matching cooperation for the LME market will be greatly reduced.
However, it is inevitable that this wave of operations will also make some overseas traders lose information about the credibility of LME and withdraw from trading.
Cliff Asness, the founder of AQR Capital Management, vented his anger on Twitter. "I've been doing this for a while," he tweeted. "It's really badly done."
The final outcome
According to the "Securities Daily" report, on the 9th, Tsingshan Group replaced the domestic metal nickel plate with its high-ice nickel, and has been allocated to sufficient spot through various channels for delivery, originally thought that this wave of transactions would eventually be the physical delivery of Tsingshan Group, defeating the overseas malicious short-selling forces, but a report pushed the incident to an unpredictable place:
Let's wait and see where this epic void ends up?