By WANG Yong
Tsingshan Holding Group, one of the world’s biggest metal producers, may not have been caught short by a seismic shift in nickel prices after all.
The London Metal Exchange (LME) suspended trading in nickel contracts when LME three-month nickel, the main price reference for the global supply, reached US$101,365 (640,000 yuan) a ton on March 8, up from US$30,000 the previous Friday.
Prices of nickel on the Shanghai Futures Exchange have gone limit-up for three days in a row. The exchange has raised fees for trading nickel and warned investors to be “rational”.
Analyst ZHU Senlin said the Ukraine-Russia conflict and a low inventory had pushed the price up, but fundamentals could not explain the chaotic price overdrive. Tsingshan has reportedly been building a short position in nickel since last year. “Rumors of Tsingshan betting on the nickel price to fall have been circulating since February,” he said.
Unlike financial futures, commodity futures are often delivered upon. Zhu said the nickel Tsingshan is holding, basically ferronickel used to make stainless steel, cannot be used to deliver on either London or Shanghai contracts. “Should Tsingshan choose to deliver, it has no suitable nickel to do so,” said Zhu. “If it wants to cut the position, it stands to lose as much as US$8 billion.”
Late on Wednesday Tsingshan responded to reports that Swiss commodity traders Glencore had forced the group to sell the position, demanding 60 percent of Tsingshan’s Indonesian holdings to make up losses, claims denied by Glencore. The company said that it had enough sheet nickel to deliver, having traded its ferronickel inventory.
XIANG Guangda, founder and chairman of Tsingshan, claimed the full support of authorities when told news site Yicai that “Foreign companies are making moves and Tsingshan is dealing with it.”
