Nickel tycoon's short bet reduced by half since crisis

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Nickel tycoon's short bet reduced by half since crisis

The total bet was reduced by more than half since the crisis roiled the metals world after the nickel tycoon covered more of his short position earlier this year, as a result of a historic squeeze earlier this year.

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The last two weeks Xiang Guangda and his Tsingshan Holding Group Co. bought contracts in the market to reduce his short bet by about 10,000 lots, or 60,000 tons, according to people familiar with the matter. The people who asked not to be identified discussing private information are looking at other ways to offset the position, including by sourcing third-party metal that meets the specifications for delivery to LME warehouses.

The latest reduction in its large short position has helped reduce cash flow stress on the world's biggest nickel producer and helped ease pressure on its banks, which had agreed not to make further margin calls on the position. It also begins to remove a key overhang for the LME and its nickel market, which has been stuck in an extended limbo of low volumes and liquidity since the crisis.

On March 8 at the LME, nickel, which is used to produce stainless steel and rechargeable batteries, went to more than $100,000 a ton. The market was reopened with new daily price limits in place and after Xiang reached the standstill deal with his banks, but volumes were well below normal levels even two months later.

In the past couple of weeks, the trading has accelerated as prices dragged down by a sell off in metals triggered by worries about the global demand outlook. The additional buying volume has lent support during the downturn in the metals markets, with a flurry of activity seen as prices hit key levels, including $30,000 and $28,000.

Xiang covered about 20% of his short position after a fall in prices below $30,000 a ton triggered a flurry of nickel trading in mid-March, Bloomberg reported at the time. Based on Tsingshan's total position of over 150,000 tons when the market was stopped on March 8, the latest covering would suggest a remaining short position of about 60,000 tons.

In 2022, the company had plans to produce 850,000 tons of nickel, an increase of 40% in a year, according to Bloomberg.

The people said that Tsingshan has held talks with refined nickel suppliers to buy metal that could be delivered to LME warehouses. Despite being the world's largest producer, the company makes different forms of nickel that don't meet the exchange specifications for delivery when short positions are held to expiry. The LME warehouses are currently home to about 73,000 tons of refined nickel at the same time.

The people said that Tsingshan has yet to make any deliveries, but the talks with other suppliers are progressing.

On Friday, the price of nickel fell by 1.8% to $27,310 a ton by 5: 10 p.m. in London.

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