London Metal Exchange nickel has become a “Star”!
The “Star” was once pulled up by 89% the day before and more than 100% the next day. Based on the highest intraday price, it soared by 248% in two days. However, in the face of the madness of market funds, the London Metal Exchange had to suspend trading in the nickel market at 16 p.m. Beijing time on March 8. Subsequently, the prices of copper, aluminum, lead, zinc and other metals plunged in a comprehensive straight line. Among them, the prices of copper and aluminum increased negatively within 10 minutes.
3 on the morning of March 8, the news that Qingshan group, a Chinese enterprise, was forced to close its position spread in the market. In this regard, the staff of Qingshan group said that the phone calls asking for the details of the incident continued, “relevant problems have been reported to the leaders for treatment, and there is no progress at present”. Qingshan holdings is a leading Chinese enterprise specializing in stainless steel production, with a revenue of more than 350 billion
Tomorrow (March 9) is Wednesday, also the delivery day. What’s the real situation? The Chinese market is waiting to see. However, such fanatical speculative bulls have obviously undermined the credibility of the London Metal Exchange.
suspend transaction! International nickel price soared by more than 100%
On the morning of March 8, I opened the computer to check the external market and was frightened by the nickel price trend on the London Metal Exchange (LME). In the overnight session of LME, nickel rose by 89% within the day, up to US $55000 / ton. By the early morning of March 8, the nickel price on the LME market closed up 76% to US $50905 / ton, the highest level since June 2007.
However, after entering the Asian trading session on March 8, the crazy price of LME nickel opened at 9:00 Beijing time. After a short-term correction, the nickel price continued to soar. At about 14:00 p.m., the increase had exceeded 100%, and the price reached more than US $101365 / ton.
“It’s amazing to see such a big increase in the past two days. It’s even more amazing that the London Metal Exchange, established in 1877, has such a big continuous increase in history, which has never happened in history, at least I haven’t seen it.” A trading analyst at the asset management institution of a Chinese Futures Exchange said.
It is reported that compared with the clear price limit in China’s commodity futures market, the London Metal Exchange has no clear price limit, which is also one of the institutional reasons for such a sharp rise in prices.
Affected by the soaring nickel price, the prices of all metals in the LME market rose sharply. During the Asian trading session on March 8, the prices of base metals on the London Metal Exchange rose sharply in a pulse at about 14 o’clock. Among them, zinc prices soared by about 20%, lead prices soared by about 10%, aluminum prices rose by about 4.5% and copper prices rose by about 4.5%.
In the face of sharp fluctuations in the market, the London Metal Exchange finally had to suspend trading in the nickel market at 16:00 on March 8 Beijing time. Subsequently, the prices of copper, aluminum, lead, zinc and other metals plunged in an all-round way. Among them, the prices of copper and aluminum increased negatively within 10 minutes.
The Pacific Securities Co.Ltd(601099) securities analysis report believes that such fanatical speculative bulls have obviously hit the reputation of the exchange. LME is the largest non-ferrous metal exchange in the world. The nature of this position squeeze is extremely bad. If LME does not take measures to maintain the normal trading order, LME’s reputation may be seriously hit.
short covering is facing huge capital pressure, LME announced that it can deliver deferred
With the further surge of nickel price today, the news that Qingshan group has been squeezed has also been fermented. In this regard, the staff of Qingshan group said that they had been wiring since the morning of August 8 and kept calling to inquire about the details of the incident, “relevant problems have been reported to the leaders for treatment, and there is no progress at present”.
When the nickel price rises for two days, the short position urgently needs to add a large amount of margin and faces huge capital pressure. If it is unable to add funds and is closed, it will bear huge losses. Earlier, the London Metal Exchange (LME) raised the margin requirements for nickel and aluminum contracts, which took effect from the closing on March 8, raising the nickel contract margin by 12.5% to US $2250 / ton.
It is a leading enterprise in the field of stainless steel billet and continuous casting, specializing in the production of stainless steel raw materials and stainless steel rods, It is mainly used in energy storage system, electric vehicle and other fields.
At present, the company’s stainless steel production base is located in Fujian, Guangdong, Zhejiang and other major coastal areas of China, while overseas is located in Indonesia, India, the United States and Zimbabwe, with eight major production bases. The company’s main business includes stainless steel and new energy industry chain. According to the company’s disclosure, its nickel equivalent production will reach Shanghai Pudong Development Bank Co.Ltd(600000) tons in 2021, 850000 tons in 2022 and 1.1 million tons in 2023.
According to LME data, since January 10, the proportion of nickel futures warehouse receipts held by a single customer has gradually increased from 30% – 39% to 50% – 80% on January 19. Since January 13, the total net long positions and warehouse receipts held by the customer on the latest three nickel futures contracts on the maturity date have accounted for more than 90% of the total warehouse receipts.
For an exchange that implements a unique membership system, it is easy to give a reason for closing positions, “the meat is too fat and the goal is obvious”. At present, the London Metal Exchange has 12 circle members.
The membership system of the London Metal Exchange is distributed in a step-by-step manner. RDMS, abcms and ABMS are the most important components of LME trading. Moreover, the LME risk control system has no large-scale reporting system and is limited to the management of clearing members. Moreover, the dispute resolution mechanism of LME is different from that of other commodity exchanges. It is decided by LME’s arbitration committee according to practice.
It is worth noting that the London Stock Exchange announced the rule adjustment after LME trading on March 7. According to the new rules, after studying the market impact of the situation in Russia and Ukraine and the recent low inventory environment of a variety of base metals, members and their customers are required to prohibit issuing tomorrow / next day arbitrage orders for aluminum, aluminum alloy, cobalt, copper, lead, North American special aluminum alloy, nickel, tin and zinc at any LME execution place at a price exceeding 1% of the official spot price of the relevant metals the day before.
As a last resort, for the short positions of these metals that enter the delivery date on or after March 9, if they cannot fulfill the delivery obligations and cannot borrow metals at a spot premium level not exceeding 1% of the official spot price of the relevant metal on the previous day, the exchange can postpone their delivery.
short positions have only three options left
It is worth noting that before March 1, the overall nickel price on the London Metal Exchange maintained a stable rise. Even on February 24 after the conflict between Russia and Ukraine, the nickel price did not soar sharply.
However, since March 1, the nickel price has soared sharply every day since the closing price of US $24225 / ton on the previous trading day. Today, it has exceeded US $101365 / ton in six trading days and soared 3.18 times in six trading days.
Since LME implements due settlement, all contracts are settled only on the due date. Obviously, LME market members have locked their concentrated positions in this nickel market, which will be settled in March.
Unlike the China stock exchange, LME three-month futures contract is a continuous contract, so there is delivery every day. However, there are differences according to different positions. If the position is within three months, delivery can be required on any trading day; Positions are held in three to six months, and the delivery date of the contract is every Wednesday; The third Wednesday of each month is the one between 6 months and 15 months.
“March 9 is Wednesday, and it’s a delivery day. Either deliver, or cut the warehouse, or extend the period to continue. Now, there are only three options.” An expert on external trading of a large Chinese company said that as the saying goes, bears do not die, bulls do not die, and funds are squeezed. If the delivery conditions can be relaxed, it is a way, but from the history of LME, it is unlikely.
Yu Jiasong, deputy general manager of the Industrial Organization Department of green Dahua Futures Co., Ltd., said that the sanctions against Russia affect the output and transportation of Russian nickel, thus affecting the global nickel supply, which is the primary factor contributing to the recent strength of nickel prices.
It is reported that Russia is an important producer and exporter of nickel. Its nickel ore reserves rank fifth in the world, and the export volume of nickel sector ranks first in the world. Russian nickel sector is the main nickel delivery product of LME. According to the data of the U.S. Geological Survey, the output of nickel ore in Russia was 250000 tons in 2021, accounting for 9.3% of the total global output.
With the increase of sanctions against Russia, many countries began to restrict and review the passage of ships carrying Russian related goods to port, and the transaction and transportation of Russian nickel were hindered and delayed. On February 26, Europe and the United States banned several major Russian banks from using the global Interbank Financial Telecommunications Association (Swift) international settlement system, which had a serious impact on Russia’s international trade activities.
On March 2, MSC, Maersk and CMA CGM announced the suspension of shipping business to Russia. This is the suspension measure implemented by the other three major shipping companies on the Russian shipping business after Ocean network express and Hapag Lloyd Ag shipping group. As of March 4, LME nickel inventory was 77082 tons, the lowest since the end of 2019. In LME nickel inventory, nickel block inventory decreased significantly. LME nickel spot premium as high as $690 / ton, indicating that the spot supply is very tight
Pushing Castle Peak on LME nickel? Glencore: groundless
Castle Peak holdings was forced to use CCB futures seats as hedging? CCB futures has not opened LME trading seats
Short lunni was forced to sell? Qingshan staff responded: the inquiry calls have been constantly reported to the leaders
In response to the sharp rise of nickel price in the previous period: three market risk tips have been issued to remind relevant units to take good risk prevention
