Ukraine war sends nickel prices soaring and metal tycoon scrambling

Business & Technology

A major Chinese miner and metals conglomerate and its “Big Shot” boss could lose $8 billion because of short bets they placed on the price of nickel.

Nickel processing plant in New Caledonia, by Jeremy Bezanger.

Tsingshan Holding Group 青山控股, a Wenzhou-based stainless steel and metals conglomerate, is facing enormous pressure to meet its traded short positions on nickel. To hedge against potential risks from a project in Indonesia, the company placed massive shorting bets that the cost of nickel would decline. But the recent invasion of Ukraine has upended those gambles.

Founded in 1988, Tsingshan has grown into a metals giant that sits in the Fortune Global 500 rankings.

  • With a reported $34 billion in revenue, and $578 million in profits, the company has flooded the commodities market in recent years by refining a low-cost material known as nickel pig iron.
  • In 2013, Tsingshan expanded into the nickel market by forming an industrial park reserve in Indonesia. The investment sought to secure and refine the country’s rich deposits of the precious metal, which is a necessary component for electric-vehicle batteries and other stainless steel products. Tsingshan is a major supplier.

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On the London Metals Exchange (LME), nickel prices have spiked 250% this week, reaching prices of $100,000 per ton. Overall, nickel is up 400% this year.

  • With such market price volatility, the LME suspended trading on Tuesday for the first time since 1985.
  • This could spell disaster for Tsingshan. Trading is expected to resume on March 11.
  • The short position placed bets on average nickel prices to the tune of $18,000 to $19,000 per ton, sources speculate. Currently, the company’s losses, on paper, amount to $8 billion.

No one feels these losses more than Tsingshan’s billionaire chairman, Xiàng Guāngdá 项光达. Dubbed “Big Shot” in international finance circles and “Nickel King” 镍王 in China, he has built up a short position on approximately 100,000 tons of LME nickel.

  • Margin calls for Xiang’s liquidity holdings are fast approaching.
  • Nevertheless, the metals tycoon remains optimistic, claiming that Tsingshan is supported by “relevant government departments and leaders.” Whether the creditors of “Big Shot” are comforted by these assumptions remains to be seen, but is highly unlikely.