Tsingshan Holding Group, the world's largest nickel producer, has said that it will be able to tackle a historic short squeeze after gathering sufficient nickel inventory for delivery, and with fresh lifelines from banks.
The company has swapped its nickel matte for domestic nickel plate, which will let it close its short position against the metal, state media Securities Daily reported on Thursday citing a reply from Tsingshan.
The firm declined to comment on Thursday.
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The company's short position was expected to cause losses worth billions of dollars and contributed to a pause in trading at major metal future exchanges in London and Shanghai.
Xiang Guangda, Tsingshan's chairman. Photo: qq.com alt=Xiang Guangda, Tsingshan's chairman. Photo: qq.com>
The Shanghai Futures Exchange on Wednesday announced that it will suspend the trading of seven categories of nickel futures for a day from Wednesday night, after they surged by the daily cap for three straight days. The metal surged by the daily limit of 17 per cent to 267,700 yuan (US$42,360) on Wednesday.
The suspension in Shanghai came after the metal skyrocketed by as much as 250 per cent in two days on the London Metal Exchange (LME), which suspended trading on Tuesday.
The prices of nickel have been rising for weeks as the market feared supplies from Russia, the largest exporter of refined nickel, could be disrupted amid its invasion of Ukraine.
Tsingshan, which is based in Wenzhou city, Zhejiang province, was facing the losses because it had built up a large short position in nickel futures on the LME, Bloomberg reported on Tuesday citing anonymous sources. But Tsingshan was able to secure new loans from lenders including JPMorgan and China Construction Bank on Wednesday.
Its short on the LME is said to be 100,000 tonnes, but could be larger when taking into account other amounts through agencies, Bloomberg said. The company has been struggling to pay margin calls, cash deposit required by clearing houses that let brokers proceed with a deal to cover potential losses on traders' positions.
A Tsingshan employee told the South China Morning Post on Wednesday that the company operating normally, and that the short position was not as huge as media reports suggested.
Founded by Xiang Guangda, 64, and Zhang Jimin, 59, a relative, in 1992, Tsingshan has grown into the largest private steel maker in China, trailing only state-owned giant China Baowu Steel Group. The company focuses on producing stainless steel, and has businesses ranging from nickel ore mining and stainless steel smelting to logistics, commodities trading and international trade. The company is also engaged in the production of new-energy related raw materials and intermediate products, batteries for electric vehicles and storage of new energy, according to Chinese media.
Xiang, Tsingshan's chairman, was the richest person in Wenzhou with its 21.5 billion yuan in assets last year, according to Chinese media. Tsingshan is a family business that he runs with wife He Xiuqin, brother Xiang Guangtong and other family members working in or managing related companies. As of Wednesday, Xiang's net worth was US$1.2 billion, according to Forbes.
Tsingshan produced 10.8 million tonnes of stainless steel in 2020, and its revenue reached 292.8 billion yuan, making it the largest private steel maker in China in terms of revenue, according to the website of its stainless steel subsidiary Tsingtuo Group.
"Foreigners have some activities going on [against Tsingshan's position,] we are actively coordinating [to tackle the problem]," China Business News cited Xiang as saying in a report late on Tuesday. "We have received a lot of phone calls today – related government departments and leaders are very supportive to us. Tsingshan's position, operation and management has no problems."
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