Wen 丨 BT Finance, author | Aoyama Egret
Recently, the London Metal Exchange "demon nickel rampant", staged a "big drama" that forced the Empty China Nickel Mining Giant Qingshan Group.
Another Chinese high-tech enterprise, Huayou Cobalt, suddenly suffered a series of drops on March 8 and March 9, and Huayou Cobalt, which has always been called a white horse stock, evaporated 26.1 billion yuan in market value in just two days.
Why did the "financial war" of the London Metal Exchange involve Huayou Cobalt? Is Huayou Cobalt really just lying guns? Why is nickel the trigger for this financial war?
Is Huayou Cobalt really just lying guns?
The source of the "long-short war" about futures metal nickel staged on the London Metal Exchange is because of the recent surge in the price of futures nickel, which can be seen from the futures nickel price of the London Metal Exchange two days after March 7, soaring from $29,246 to $101365, an increase of 247%.
And the Chinese enterprise Qingshan Group, which is in the "eye of the storm", holds 200,000 tons of nickel empty orders, where can it make foreign bears not look red? If the nickel futures price is delivered after the London Metal Exchange is shorted, Tsingshan Holdings will lose tens of billions of dollars directly.
However, after a series of counterattacks, the short-selling plan of foreign bears did not succeed, and on March 9, the London Metal Exchange issued an announcement that because of abnormal trading, nickel futures trading was suspended, and at the same time announced that nickel futures trading after March 8 was invalid, which was unprecedented in the history of the London Metal Exchange.
Huayou Cobalt and Tsingshan Group in the "Eye of the Storm" have many intersections, so this "nickel futures long-short war" has also brought a huge impact to Huayou Cobalt, including the continuous decline in stock prices.
Tsingshan Industry is the world's largest nickel and stainless steel producer (unlisted enterprises), which has five major groups such as Qingtuo Group, Yongqing Group, Qingshan Holding Group, Shanghai Dingxin Group, Yongqing Shares, etc., with more than 300 subsidiaries under its jurisdiction, and sales in 2020 reached 292.8 billion yuan, it can be said that Tsingshan Industrial's business has spread throughout Indonesia, India, the United States and Zimbabwe and other places in the world.
Huayou Cobalt, established in 2002, is a high-tech enterprise mainly engaged in the research and development and manufacturing of new energy lithium battery materials and cobalt new materials, and in recent years, Huayou Cobalt industry relies on the layout of global industrial resources and is slowly growing into a global cobalt industry leader.
Huayou Cobalt's developing business and Tsingshan Group are getting closer and closer, especially in March 2021, Tsingshan Group signed a high-ice nickel supply agreement with Huayou Cobalt and Zhongwei Shares. The three parties jointly agreed that Tsingshan Holdings would supply 60,000 tons of high-ice nickel to Huayou Cobalt and 40,000 tons of high-ice nickel to Zhongwei co., Ltd. within one year from October 2021.
This cooperation is crucial for Huayou Cobalt, because Huayou Cobalt's main revenue and profit are mainly based on copper and cobalt business, contributing 78% of gross profit, and other precursor businesses only contribute 19% of revenue, but in the long run, Huayou Cobalt's revenue growth rate has gradually declined. The reason behind this is that Huayou Cobalt's previous copper and cobalt business has been relying on Congo (DRC) cobalt mining and domestic refining, while cobalt mining in the Dr. Congo (DRC) has increased more uncertainty in recent years.
According to the USGS, the USGS estimates that 70% of the world's cobalt resource reserves are concentrated in the Democratic Republic of the Congo (DRC), while China's reserves account for only 1.1% of the global reserves. Correspondingly, 68% of the global cobalt mining in 2020 comes from the Democratic Republic of the Congo (Dr. Kinshasa), only 2% from China, from these data it can be seen that the cobalt mining volume of the Democratic Republic of the Congo (DRC) accounts for a very high proportion of the world, if Chinese mining companies put eggs in one basket, it is bound to cause great energy security problems.
In recent years, with the rapid development of the lithium battery industry, the contradiction between supply and demand of metal cobalt as the upstream key raw material in China has increased unabated, European and American countries have stepped up the competition for mineral investment rights in the Democratic Republic of the Congo (DRC), and the new mining policy industry just introduced by the DRC (DRC) has increased great uncertainty, industry insiders pointed out that active global mineral resource allocation is the best choice to solve the bottleneck of China's strategic mineral resources.
In recent years, Huayou Cobalt has frequently mentioned "transforming from a global leader in the cobalt industry to a leading enterprise in the new energy lithium battery materials industry", that is, reducing the proportion of cobalt business and increasing the proportion of nickel business. Because "the growth rate of nickel for batteries exceeds the industry, the proportion of precursors and cathodes is gradually increasing", and the dependence on cobalt ore can also be reduced.
Therefore, Huayou Cobalt chose to cooperate with Tsingshan Group to lay out in a nickel mine, another important element of new energy lithium battery materials.
According to the latest data from the U.S. Geological Survey, the global nickel reserves will be about 94 million tons in 2020, and the nickel reserves of Indonesia, Australia and Brazil occupy the top three in the world. Indonesia, in particular, will produce 760,000 tons of nickel in 2020, accounting for 30.4% of the total global production.
Huayou Cobalt, Zhenshi Group, CATL and Tsingshan Holdings jointly established IWIP to jointly develop the Indonesian Weidabei Industrial Park project, which is the largest industrial park project for the comprehensive development and utilization of nickel, chromium and iron ore resources in Indonesia.
Huayou Cobalt also specifically mentioned this project in its 2020 annual report. Huayou Cobalt's financial report shows that the company began to launch a nickel metal smelting project in Indonesia in cooperation with Tsingshan Group in 2018, with the purpose of providing raw material supply for the transformation of the company's new energy lithium battery materials.
Not only Chinese companies have targeted Indonesia's rich nickel ore resources, Europe and the United States and other countries have long been eyeing this piece of "fat meat", because of this, so in this "nickel futures long and short war", Gleneng forced the warehouse Qingshan Group, one of the purposes is to "want its 60% equity in Indonesian nickel ore".
The analysis pointed out that the global mineral business layout of Chinese enterprises such as Huayou Cobalt Is exactly what relevant enterprises in Europe and the United States are red or afraid of, so it is said that Tsingshan Group is in the "eye of the storm", it is better to say that China's mineral companies in overseas layout are in the "eye of the storm".
Is Huayou Cobalt really unaffected?
Huayou Cobalt may "lie guns" in this long-short war, Huayou Cobalt industry recently issued a clarification statement, the statement said that the company has not been forced to liquidate the situation, the current risk is controllable, the company's production and operation situation is normal.
The statement also specifically mentioned that Huayou Cobalt's layout in Indonesia is normally advancing such as the wet smelting crude nickel hydroxide nickel and cobalt project of laterite nickel ore and the laterite nickel ore pyrocene smelting high ice nickel project.
In fact, Tsingshan Group has been forced to empty, and Huayou Cobalt industry cannot be unaffected, because Huayou Cobalt's business and Qingshan Group have been deeply tied, and the cooperation projects between Huayou Cobalt and Qingshan Group have not only been limited to Indonesian nickel ore projects, especially in recent years, huayou cobalt and Qingshan Group have cooperated in lithium battery business.
Nickel ore can not only be used to manufacture stainless steel products, in recent years the industry is more keen to apply it to ternary lithium batteries, as new energy vehicles are pushed by capital, more and more mining giants have begun to lay out in new energy projects. For example, an important direction of Huayou Cobalt's business transformation is "new energy lithium battery materials", and Tsingshan Group is the same, Tsingshan Holdings has personally entered the new energy industry, and cooperated with Huayou Cobalt.
According to public information, in February 2021, Huayou Cobalt announced that it will establish Huashan Nickel and Cobalt (Indonesia) Co., Ltd. in Indonesia with Qingshan Technology, and Huayou Cobalt indirectly holds 68% of the equity of Huashan Nickel and Cobalt through overseas wholly-owned Sun Company.
On May 14, 2021, Huayou Cobalt announced that it and Qingshan Technology set up a new import and export company in Tongxiang with a registered capital of 10 million yuan and Huayou Cobalt holding 70% of the shares, just a few days later, Huayou Cobalt and Qingshan Technology once again set up a cooperative company in Beijing with a registered capital of 5 million yuan and Huayou Cobalt holding 68% of the shares.
According to the information of Tianyancha, Qingshan Technology is a subsidiary of Qingshan Holdings, and this cooperation is actually a continuation of the cooperation between Huayou Cobalt and Qingshan Holdings.
Not only that, Huayou Cobalt also directly entered Wenzhou, where the headquarters of Qingshan Holdings is located, and set up an import and export company in Wenzhou and Qingshan Holdings, Huayou Cobalt held 70% of the shares, and just a few days later, the two sides set up import and export companies in Tongxiang and Wenzhou again.
In just three months, Huayou Cobalt and Tsingshan Holdings have established no less than 5 companies, and according to media reports such as interface, about 80% of Huayou Cobalt's long-term receivables may be related to Tsingshan Holdings.
According to the analysis of industry researcher Wei Xinran, in other words, if Tsingshan Group suffers substantial losses due to forced shorting, it will inevitably be brought to Huayou Cobalt's overseas business layout, at least it will affect Huayou Cobalt's nickel ore business in Indonesia.
The Russian-Ukrainian conflict is just a symptom?
From the perspective of nickel futures on the London Financial Exchange, spot nickel continues to rise from the three-month contract, and the rise in spot nickel from the three-month contract has soared to about $700 per ton, the highest level since 2007.
Many analysts believe that the reason behind the sharp rise in the price of nickel is the conflict between Russia and Ukraine, which has led to the market's increase in concerns about bulk futures, so it has caused the rise, is the reason behind it really only so simple?
In terms of reserves, Russia is indeed the main mineral country of nickel, but a closer look at Russia's nickel production in 2021 is only 250,000 tons, accounting for only 9% of the total international nickel production, and the proportion in the world is not very high. With the escalation of the Conflict between Russia and Ukraine, it did have a certain impact on the supply of nickel, but this is not the main cause.
The deeper reason behind this is that the dollar credit system has gradually collapsed in recent years, and more and more currencies in the world have been withdrawn from the virtual stock market and other investment targets to the commodities of offline entities, which has become a sign of the currency's transformation from virtual to real.
The conflict between Russia and Ukraine in February 2022 accelerated the process. Because Russia, as the world's largest exporter of energy and mineral deposits, has directly pushed up the international prices of crude oil, natural gas and minerals after being subjected to Western economic sanctions, and also pushed up the prices of international commodity transactions.
Jeff Currie, head of global commodities research at Goldman Sachs, even wrote: "Extremely bullish on commodities and believes that a super cycle of up to 10 years is possible." "In this context, more and more monetary investments are withdrawing from the stock market or other investment targets and beginning to shift to commodity trading in offline entities.
It is in this context that the London Financial Exchange has staged such a "long-short war" for the first time, but it has unprovoked involvement of Chinese companies Qingshan Group and Huayou Cobalt.
If this is a financial reason, then the world's shortage of nickel supply is a crisis in the supply chain.
Nickel metal is not only an important material for the manufacture of stainless steel, but also an important raw material for ternary lithium batteries in the hot new energy industry, and with the development of power batteries, because the price of cobalt fluctuates greatly and the price is high all year round, so the lower price of nickel sulfate batteries has become the fastest growing technology trend. Since the beginning of 2021, there has been a clear upward trend in global nickel demand.
According to the latest data from the World Bureau of Metals Statistics, in 2020, the global nickel supply is still in a state of excess, but after only one year to 2021, the global nickel supply shortage reached 144,300 tons.
Because global demand for nickel has soared, while global nickel inventories continue to decline. According to the latest data from the London Metal Exchange, as of mid-March, Lun nickel stocks were only 76,800 tons, a significant drop of more than half from 190,000 tons in the same period last year, and showed a continuous weekly downward trend, especially last week, when global nickel stocks fell to a record low.
According to industry analyst Li Zhuowei analysis, the current global nickel ore resources are in a pattern of low inventory, strong reality, weak expectations, global nickel inventory continues to decline and is at a historical low, while the actual supply and demand is strong, which can not be alleviated for a long time.
In addition, with the improvement of the epidemic situation, the demand for nickel at the production end is also gradually increasing, and the global traditional mineral demand season is coming, such as stainless steel manufacturers in many parts of China, which are expected to increase stainless steel discharge production in March, which further aggravates the demand gap for nickel ore.
This time in the London Metal Exchange "forced to empty war", behind the reflection of Chinese companies and Western companies on overseas mineral resources competition tends to be white-hot, this round although the Chinese companies counterattack to win, but the future around the game around mineral resources will be more, like Huayou Cobalt Chinese companies are bound to encounter more challenges, Chinese enterprises when self-improvement is still the magic weapon to win in the game.