China’s Tsingshan group, the firm at the heart of a record rupture on the London Metal Exchange in the week to March 11, said March 15 it had struck an agreement with its bank creditors that would give it time to address its trading position that led the LME to suspend nickel trading.
LME Resumes Nickel Trading Amid Tsingshan's Standstill Agreement
Following Tsingshan's statement on March 15, the London Metal Exchange (LME) confirmed that all nickel contracts would resume trading at 0800 GMT on March 16 in London.
Nickel trading had been suspended during the early trading session on March 8 after prices surged more than twofold, surpassing the $100,000/mt mark and hitting an all-time high of $101,365/mt. The LME also implemented new trading restrictions to prevent future extreme volatility, including daily price limits across all base metals.
Tsingshan's statement indicated that the company would be able to resist pressure to make additional margin calls, reducing the likelihood of being short squeezed when the LME restarts trading. According to market sources, the company’s decision was part of a standstill agreement, and Tsingshan, along with a banking syndicate, would negotiate potential secured standby liquidity lines that mainly address Tsingshan's nickel margin and settlement requirements.
Under the terms of the deal, the participating banks have committed to not closing out positions in response to Tsingshan or issuing further margin calls on current positions. Tsingshan also stated that its existing hedge positions could be gradually reduced in a fair and orderly manner once the abnormal conditions in the market are resolved, as a core condition of the agreement.
The market is closely monitoring the reopening of nickel trading on the LME and the manner in which Tsingshan will unwind its existing hedge positions. However, the size of Tsingshan's trade has not been disclosed publicly.
Tsingshan, the world's largest stainless steel and nickel producer, has reportedly secured sufficient spot material in nickel plates to settle with the LME, according to China's Securities Daily on March 9. However, sources have expressed doubts, highlighting the difficulty of producing this volume quickly, as China is not a significant producer of electrolytic nickel. Unlike the Shanghai Futures Exchange (SHFE), only electrolytic nickel can be traded on the LME.
On March 15, according to SHFE data, the most-active nickel contract for April delivery settled at Yuan 216,490/mt ($33,948/mt), rising 4.7% from the previous settlement price after two consecutive days of decline. Market sources had anticipated some short-term support for domestic prices due to the tightening supply of electrolytic nickel. Meanwhile, downstream consumers have been watching the recent price fluctuations, hoping that the nickel market will stabilize after the surge.
