China’s Tsingshan Holding Group may turn into a casualty of skyrocketing nickel prices in the aftermath of Russia’s ‘military operation’ in Ukraine. The company owned by Chinese tycoon Xiang Guangda, according to a Reuters report, plunged into crisis after it bet on short positions in nickel prices.
Earlier on March 8, nickel soared to record highs and reached $100,000 at the London Metal Exchange (LME). Commentators speaking to news agency AFP said that the prices rose due to short squeeze. Short squeeze happens when ‘investors bet on falling prices but are then forced to close out their positions and purchase at a far higher price, sparking an exceptionally volatile spike’ the news agency explained in a report.
Tsingshan may have placed a similar bet and will now either have to pay off the outstanding short positions, which could be as high as $8 billion and deliver nickel in kind, if it possesses that much amount of nickel. Tsingshan started building a short position in 2021 but the unannounced war in Ukraine sent nickel prices skyrocketing with Russian mining giant Norilsk Nickel facing unprecedented sanctions.
However, following the losses that it may face, the Chinese government may have to step in to save Tsingshan and swap some of its high grade nickel reserves with the low grade nickel pig iron (NPI) to meet the standards set by the LME. The nation has 100,000 tonnes of nickel in state stocks.
The company, according to the Reuters report, is instrumental to Chinese president Xi Jinping’s China’s Belt and Road Initiative.
The company, however, remained confident regarding the operations it has in Indonesia. Indonesia is the world’s largest producer of nickel. The metal has become important to automobile industries for its use in electric batteries as demand grows for shifting to greener energy. Prices for metals including palladium have also risen along with nickel as sanctions stifle Russian exports. Russia is the third-largest producer of nickel and is known for supplying high-grade nickel to the market.
Tsingshan on the other hand produces low grade nickel pig iron (NPI). In Indonesia, the Chinese metal giant aims to become the only address for all EV battery ingredients and is known for implementing projects at a fast pace, news agency Reuters reported.
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