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Nickel’s Chinese tycoon “Big Short” trips Kiyoyama’s miracle growth

The office, headquartered by The London Metal Exchange, is located in London, England, on January 18, 2018.Reuters / Peter Nicholls

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  • Kiyoyama faces loss from short position
  • Chairman Sho has been in a short position for some time
  • LME stopped nickel trading last week
  • Tsingshan’s business was built on nickel production in Indonesia

March 14 (Reuters)-Chinese tycoon Xiang Guangda has to find a way to rescue his Tsingshan Holding Group from the crisis after a bet on nickel prices backfires, essential to the electric car industry Increases the volatility of various metals.

One of the world’s top nickel producers suffers huge losses in short positions after prices soared above $ 100,000 per ton last week, forcing the London Metal Exchange to stop trading nickel. Facingread more

Tsingshan needs to pay off any outstanding short positions that could be as much as $ 8 billion, or prove that he has enough deliverable nickel to pay back in kind.

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Beijing told Reuters that sources familiar with the matter could intervene to rescue Chinshan, China is high with low-grade nickel pig irons (NPI) that Chinshan produces to meet LME quality standards. Two analysts who may replace some of their grade nickel reserves said they have about 100,000 tons of nickel in their national inventory.

Kiyoyama and China’s National Reserve did not respond to requests for comment.

Tsingshan was previously aware of market volatility.

Last year, it triggered price cuts with surprising news that it could solve a major bottleneck in electric vehicles by offering battery material manufacturers nickel mats and increasing battery grade supplies in a cheaper way. ..

When the bet price went down, Kiyoyama started building short positions last year. The bet backfired as Russia’s invasion of Ukraine soared metal prices and put pressure on large short-position holders, including Kiyoyama.

“The market felt that (Chinshan) would start moving, but it was probably too early,” said Angela Durant, Wood Mackenzie’s chief nickel analyst.

Kiyoyama suggests that foreign factors may be pushing up nickel prices.

“Foreigners have some behavior and we are actively coordinating. [with related parties]”China Business News quoted Xiang as said on March 8.

Market turmoil has not affected Tsingshan’s Indonesian operations, mining sources familiar with the matter told Reuters.

For Indonesia, Tsingshan is a way to realize its ambition to become a one-stop shop for EV battery raw materials, and the company executed the project at ultra-high speed. Western companies often complained personally about the access and resources Tsingshan obtained domestically.

“The government has ambitions in Indonesia and wants to build a battery hub for electric vehicles, which is why there are policies to support the industry,” said a source. ). “

Chinshan is also considered the Southeast Asian poster child of President Xi Jinping’s vast infrastructure program, the Belt and Road Initiative of China.

In contrast to the privately held Tsingshan, some high-profile projects led by Chinese state-owned companies have been left behind in concerns about high prices, corruption and debt sustainability.

Market disruptor

Founded in Wenzhou in 1988, Tsingshan began manufacturing stainless steel and automobile windows and doors.

But that fate changed when 64-year-old Xiang began researching the Indonesian market in 2009. Over the next decade, low-cost nickel pig iron has rocked the global nickel industry.

We have established a facility in Indonesia, the world’s largest producer of nickel, and boast a production volume ranging from nickel sulfate to nickel mat, an intermediate product that can be used for both stainless steel and batteries.

Tsingshan employs more than 40,000 people and is at the forefront of two major nickel hubs in Indonesia, including the 5,000-hectare Morowari Industrial Estate, with airports, mining plants, ports and executive visitor hotels.

The company’s facility in Sulawesi is equivalent to 850,000 tonnes of nickel this year and aims to produce 1.1 million tonnes by 2023.

“They did something absolutely miraculous because there was nothing on the site in 2015. It was a masterpiece for them to escape China’s higher power (cost) and move everything to Indonesia.” Said Durant.

The industry has acknowledged much of this success to Xiang.

He has become known as a market turmoil that can “dominate the world,” said Stephen Brown, Canberra’s independent nickel consultant.

Mr. Shan said he opposed rising nickel prices and is sticking to being a low-cost producer of nickel and stainless steel.

“I don’t think this crisis will make a big difference in Kiyoyama’s strategy,” he added.

According to market sources, Kiyoyama has reduced its exposure, but it is unlikely that it has fully covered all positions.

The state-owned Chinese newspaper Securities Daily said on March 9 that Tsingshan had deployed “sufficient spot products” for delivery by replacing nickel mats with nickel plates in the domestic market.

The LME enables the supply of nickel cathodes and briquettes, including plates.

“There aren’t many spot nickel products on the market, and Kiyoyama is unlikely to win 100,000 tonnes,” said a Guangdong-based analyst.

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Additional reports by Ed Davies and Dominique Patton; edited by Diane Craft

Our Criteria: Thomson Reuters Trust Principles.

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