Monday, March 14, 2022

Tough times on the nickel market

Who knew that one of the weird aftereffects of the Russian invasion of Ukraine would be the roiling of the world nickel markets? Via Bloomberg: 
Indonesia, the world’s top nickel producer, will raise production capacity of the metal after prices soared past $100,000 a ton, while the coal market is unlikely to get similar relief.

The country is set to add 393,000 tons to 400,000 tons of nickel in metal output capacity this year, bringing the total to as much as 1.4 million tons, according to Coordinating Minister for Investment and Maritime Affairs Luhut Panjaitan. Next year, Indonesia will add another 500,000 tons of annual production capacity, he added...
This massive increase in prices has caught a Chinese nickel producer in a bad position: (via Reuters): 
March 14 (Reuters) - Chinese tycoon Xiang Guangda has to find a way to bail his Tsingshan Holding Group out of a crisis after its bet on nickel prices backfired, fuelling more volatility in a metal essential for the electric vehicles industry.

One of the world's top nickel producers faces massive losses on its short positions after prices soared over $100,000 per tonne last week and forced the London Metal Exchange to halt nickel trading.

Tsingshan has to either pay off the outstanding short positions, which could be as high as $8 billion, or prove it has sufficient deliverable nickel to repay in kind.

Beijing could step in to rescue Tsingshan, a source familiar with the matter told Reuters. China could swap some of its high grade nickel reserves for low grade nickel pig iron (NPI) that Tsingshan produces to help it meet LME quality standards. China is estimated to hold around 100,000 tonnes of nickel in state stocks, two analysts said.\

Who knew the Chinese government held nickel in storage? This little detail was interesting: 

The LME allows delivery of nickel cathodes, including plate, and briquettes.

"There isn't much spot nickel product in the market, it's not even likely that Tsingshan could get 100,000 tonnes," said a Guangdong-based analyst who declined to be named.

 Briquettes, who knew? 


  1. a bit of background for folks like me had no clue what this was about:
    Tsingshan was in the nickel futures market; typically futures are for trading something in the future but its a capital playground if one can successfully predict something would be cheaper or more expensive. Nickel was targeted because capital sees Tsingshan unable to supply a ridiculous amount of Nickel without Russian Nickel, thus capital bought this ridiculous amount and pushed the prices to be insanely high; Tsingshan was expected to default and pay $8 bil (more likely selling out their indo nickel mine shares) but the Chinese gov does have this ridiculous amount of Nickel to back them up, and now capital is forced to buy this insanely high priced nickel or default to something ridiculous too.

    To me this Nickel demand is not real, not sure why Indonesia is ramping up Nickel production. Maybe they need to payback chinese gov's nickel stock? but its unlikely capital will just hoard these expensive nickel anyways

    1. If I am reading this correctly, based on the summary, it sounds like the nickel producer was shorting the world market and losses can be infinite when you short anything. Why is a producer allowed to short anything it produces? A producer can manipulate the market and adjust their output to try to affect prices favorable to them. Much like Pete Rose or the black Sox scandal betting on their own games.


looks like Blogger doesn't work with anonymous comments from Chrome browsers at the moment - works in Microsoft Edge, or from Chrome with a Blogger account - sorry! CJ 3/21/20