The green mountains are still in the demon nickel sunset red

Zheng Dan, a reporter of this newspaper, reported from Beijing

"A dollar-a-kilogram coin is worth almost 107 dollars, but if it melts, the nickel in it alone is worth 150 dollars."

This passage circulating on the Internet describes the unreasonable degree of the nickel price trend of LME (London Metal Exchange) in the past two days.

Nickel is an important material used in the production of stainless steel and ternary lithium batteries. From March 7 to March 8, Beijing time, the LME composite nickel 03 contract rose from $29,246 to $101365, with the highest increase of 247%. There must be demons when things go wrong, and this phenomenon is directly called "demon nickel".

Folk rumors say that the "demon nickel" surge is related to the recent sanctions imposed by Russia, but more discussion tends to be that the domestic stainless steel leading enterprise Qingshan Holdings has been forced short by foreign capital, and the potential short position loss may be as high as $6 billion to $12 billion. The foreign capital that maliciously forced the short space pointed directly to the Swiss Glencore, and it was rumored that it intended to take 60% of the shares of Qingshan Holdings in a nickel mine in Indonesia.

Although Glencore responded to the rumors, saying that such a statement was pure nonsense. However, Tsingshan Holdings said to the outside world, "Foreign investment does have some actions, is actively coordinating, the current position and operation is no problem." ”

Subsequently, LME issued consecutive announcements to explain that nickel futures have unprecedented abnormal trading situations, in this regard, LME expects to suspend nickel futures trading until March 11, Beijing time, declaring that trading is invalid after 8:00 a.m. Beijing time on March 8.

"If LME doesn't cancel the deal, it will face a crash." Wang Yanqing, a senior researcher of non-ferrous metals at CITIC Construction Investment Futures, who has long been concerned about the nickel industry chain, told reporters that this undoubtedly gave Tsingshan Holdings a chance to breathe.

Just when everyone was sweating for Aoyama Holdings, the situation suddenly changed again. According to the "Securities Daily" report, on March 9, Qingshan Holdings replaced the domestic metal nickel plate with its high-ice nickel, and has been allocated to sufficient spot through various channels for delivery. The above-mentioned foreign investors who maliciously short-sell may face the embarrassing situation of "lifting a stone and dropping it on their own feet".

What is certain is that the truth of the whole thing is very opaque. With the advancement and reversal of tension, the people can only follow the wind and watch the "big drama" outside the door.

Aoyama is suspected of being forced to empty by overseas capital

If it were not for the rapid growth of "demon nickel", many outsiders in the heavy metal circle would not know Xiang Guangda, the head of Tsingshan Holding Group in this news hotspot.

Because he has always been low-key, Xiang Guangda is known as the most mysterious rich man in Zhejiang, and he is the richest man in Wenzhou with assets of 21.5 billion yuan in the "2021 Hurun Global Rich List". But the Internet with memories has little information about him.

His name of Qingshan Holdings, ranked among the Fortune Global 500, is currently China's largest private steel group, mainly producing stainless steel, started in the 1980s, in June 2003 registered the establishment of Qingshan Holding Group Co., Ltd., headquartered in Xiang Guangda's hometown - Wenzhou Qingshan Village, Zhejiang.

Since then, he has successively established Shanghai Dingxin Investment Group, Qingtuo Group, Yongqing Group, Yongqing Technology and other companies, and has formed five major group companies with more than 300 subsidiaries.

In 2009, Xiang Guangda won 47,000 hectares of laterite nickel mining rights in Indonesia, the world's largest nickel exporter. Before the Indonesian local government began to implement the export restriction order of raw ore in 2014 and completely ban the export of nickel ore, Tsingshan Holdings laid out the nickel ore mining, export and nickel iron smelting industry in advance, invested in the construction of the Qingshan Industrial Park in the China-Indonesia Economic and Trade Cooperation Zone, and established a complete industrial chain of "raw ore - nickel iron - stainless steel" in the local area.

Since then, Xiang Guangda has continued to buy nickel in India, the United States, Zimbabwe and other countries, becoming the "World Nickel King". According to the statistics of CITIC Construction Investment, Tsingshan Holdings has a global nickel market share of 18% in 2020. Also this year, it overwhelmed Baosteel with a revenue of 290.8 billion yuan of 284.4 billion yuan.

In 2021, Tsingshan Holdings announced plans to use an alternative process to produce battery-grade nickel from the raw materials that previously produced stainless steel, causing a certain degree of volatility in the market. Tsingshan Holdings is currently operating three high-ice nickel production lines with a monthly production capacity of about 3,000 tons. Its goal is to reach an annualized production of 100,000 tons by October 2022. If successful, Aoyama will solve one of the biggest bottlenecks in battery production and may put downward pressure on nickel prices.

Xiang Guangda, the actual controller of Tsingshan Holdings, and some of his business partners have established a large number of short positions in the nickel derivatives market since last year to hedge against the risk of possible price declines in the nickel production process.

The so-called short position refers to the future bullish price will fall, selling futures contracts. On the contrary, the party who bought the futures contract is "long", and this time, it is rumored that the overseas competitors of Tsingshan Holdings manipulated the market by monopolizing the contract, so that the nickel price increased, so as to achieve long profits.

Both bears and bulls are ways of hedging. Hedging, also known as hedging trading, refers to the fact that traders buy/sell the same amount of futures trading contracts on a futures exchange as hedging while buying/selling actual goods. This is an act that minimizes price risk and temporarily replaces physical trading with futures trading.

That is to say, when Tsingshan Group holds a large number of spot spots, in order to prevent the impact of the long-term decline in nickel prices on the enterprise, it takes out part of the funds to buy short orders in the futures market. If the nickel price falls, Tsingshan Group can use the money earned by short orders to make up for the loss of spot prices; if the nickel price rises, Tsingshan Group can also use the money earned on spot to make up for the loss in the futures market.

A futures analyst who did not want to be named told reporters that with the expansion of the layout of domestic enterprises in Indonesia, the production of nickel has gradually increased, and it can be determined that nickel production is an industry that will gradually move towards excess in the future. "The profit of nickel iron has exceeded 100%, this situation is difficult to sustain, because of this logic, Tsingshan Holdings needs to do some hedging that can lock in future profits at a high level, but what he does is non-standard."

The above analyst further explained that in the industry, the nickel traded on the London Metal Exchange is a nickel sulfide ore system, and the delivery product is pure nickel (nickel content is not less than 99.8%), but Tsingshan Holdings is not hedging pure nickel, so there is a mismatch. "Pure nickel is the standard, ferronickel (nickel content of about 10%) and high ice nickel (nickel content of about 70%) is non-standard, in the case of soaring nickel prices, although Aoyama's nickel production capacity is very large, but high ice nickel and nickel iron on the London Exchange can not be delivered."

"The corresponding product of Lun nickel is pure nickel, and Russian nickel has a more position in the supply of pure nickel, while the current pure nickel inventory is at a low level, and the space for supply relaxation is very limited." Wang Yanqing, a senior researcher on non-ferrous metals at CITIC Construction Investment Futures, further added that the situation in Russia and Ukraine is the fuse for the sharp rise in nickel prices since March.

Wang Yanqing told reporters that since March, the rise of Lun nickel has exceeded 100%, which is difficult to support the reduction in supply.

Since Russia began its military operations against Ukraine, Europe and the United States have launched several rounds of sanctions. At present, some Russian banks have been expelled from the SWIFT system, Russian trade settlement has been significantly affected, and US Secretary of State Blinken said that the United States and its allies are considering a coordinated embargo, making it more difficult for Russian nickel to go abroad.

From the perspective of the actual number of impacts, USGS data shows that in 2021, Russia's nickel mineral output will account for about 9.3% of the global nickel mineral output, and the proportion of Russian nickel production will account for more than 23% of global refined nickel production. From this data, if the supply of Russian nickel is completely interrupted, it will indeed have a decisive impact on global supply.

That being the case, Tsingshan Holdings is facing a liquidation crisis with the participation of overseas capital, where does this statement come from?

"Russia was sanctioned, the supply did decrease, but the amount of supply reduction accounted for nearly 10% of the total nickel, and the 10% reduction caused a 200% price increase, which is obviously abnormal." Wang Yanqing told reporters that the change in price caused by changes in supply and demand must be a relatively slow process, even if there will be a relatively large increase in the middle, it will not be too outrageous.

In 2019, Indonesia banned the export of nickel ore, and the price of nickel rose by 20%-30% in two months, which is a rare phenomenon in the industry. But now that nickel prices have risen by more than 200%, the fundamentals (market supply and demand) have not changed much, and there is only one consensus in the industry - there are funds manipulating the market and forcing short positions.

LME suspends trading, bears reverse the situation?

"The current events are unprecedented. LME is committed to working with market participants to ensure that the market continues to function in an orderly manner. The LME understands the desire of market participants to reopen the market, but also notes that the market wants to be cautious about reopening. ”

On March 8, LME issued an announcement saying credit conditions in a broad commodity market were under pressure due to geopolitical events and rising prices. Given the uncertainty that remains in the overall market, LME believes it would be inappropriate to announce a date for the resumption of trading in nickel mines. The next day, LME continued to issue announcements saying that while nickel was still suspended, it allowed some members to transfer nickel positions, reducing risk within the system.

The London Metal Exchange, which has been around for 145 years, is also facing this situation for the first time, although it is the world's largest futures and options market for base metals and other metals, and has to temporarily suspend trading to reduce losses.

Wang Yanqing further explained to reporters that futures are all using a daily debt-free system, and in this incident, the bulls have been rising, and the bears have been losing. For the exchange, it is necessary to ensure that the money earned by the bulls arrives on the same day, and the money lost by the shorts on the same day is replenished to the exchange on the same day. "So there is a situation where the losing party has no money to call the exchange, so the exchange has no money to give to the bulls. In this way, the mechanism of the exchange will collapse. If trading is not suspended, the attack on investors and exchanges is very large, and exchanges may even fail. ”

Wang Yanqing believes that the LME system has a booster for this market. After Russia was sanctioned by Europe and the United States, the delivery range of Lun nickel futures has changed significantly, but LME has not fully responded to this in advance. At present, LME has added a deferred delivery mechanism, which can make short positions last longer, giving Tsingshan Holdings a chance to breathe.

At the same time, this also brings more financial pressure to many parties. However, the measure of deferred delivery cannot directly resolve the risk, or the bulls and bears need to reach an agreement on the disk.

On March 8, the Shanghai Futures Exchange issued a notice calling on market participants to do a good job in market risk control. The Shanghai Futures Exchange pointed out that "the recent international situation is complex and changeable, the price of nickel in the overseas futures market has fluctuated sharply, and the institute will take further measures in accordance with market conditions in accordance with regulations in the last period, and invite member units and investors to do a good job in risk prevention, rational investment, and jointly maintain the smooth operation of the market." ”

Wang Yanqing believes that this design system of Shanghai nickel futures can make the market calm down faster, but also give the participants more room for operation, and will not be like Lun nickel futures, which will rise and fall within one day, resulting in losses being unable to bear, and also bringing instability to the market. Relatively speaking, Shanghai nickel futures will make the market run more smoothly.

From the perspective of the spot market, due to the high price of nickel, the buyer faces a strong risk if he receives the goods at a high level, so the spot market is in a state of stagnation in the short term, and both buyers and sellers are waiting for the situation to be clear. Xu Aidong, vice chairman of the Nickel Branch of the China Nonferrous Metals Industry Association, also said that the spot trade of nickel is close to stagnation, and some downstream nickel consumer enterprises have suspended orders.

On the evening of March 9, Securities Daily reported that Tsingshan Group replaced domestic metal nickel plates with its high-ice nickel and had been allocated to sufficient spot through various channels for delivery. As soon as the news came out, it aroused heated discussion among the masses.

Wang Yanqing believes that the main problem in this incident is the shortage of delivery products. In the case of the interruption of the Russian nickel delivery channel, it should be responded to as early as possible and reduce its position. From the perspective of risk control, the general enterprise hedging will set a stop loss limit to avoid the occurrence of extreme situations, if the rumors are true, Then Qingshan has not made a risk control plan in advance.

(Editor: Hao Cheng Proofreader: Peng Yufeng)