The tight nickel price has taught enterprises a lesson. In extreme market, the first thing is to control risks

LME nickel continued to rise, breaking through US $100000 / ton on March 8, hitting another record high, and triggering the suspension and cancellation of trading by the exchange. The main contracts of China’s Shanghai nickel futures also continued to rise by the limit.

It is rumored that Castle Peak holdings holds a large number of nickel short positions on the London Metal Exchange (LME), which are sniped and forced short by European and American commodity futures giant Glencore. The logic extends to that Castle Peak holdings will suffer huge losses or hand over 60% equity of Indonesian nickel mine and park interests. The relevant personnel of Glencore, Switzerland, responded to the media that there was no basis.

“Foreigners do have some actions and are actively coordinating. I received a lot of calls today, and relevant state departments and leaders are very supportive of Qingshan.” Xiang Guangda, chairman of the board of directors of Qingshan industry, responded to China business on the afternoon of March 8 that Qingshan is an excellent Chinese enterprise with no problems in position and operation.

On the afternoon of March 8, LME took some regulatory measures: first, it suspended all forms of nickel futures contract trading at 8:15 London time (16:15 Beijing time) on March 8; The second is to cancel all nickel transactions executed on the OTC and LME select screen trading system at or after 0 on March 8, UK time.

A number of futures researchers told the first financial reporter that there are fundamental positive factors in the soaring nickel price, but the increase has far exceeded the positive degree. The future nickel price is facing great callback risk, and the callback time is difficult to grasp. The first thing investors should do is to control risks, reduce positions, or even hold short positions and wait and see.

Castle Peak holdings is in danger

On March 7, Beijing time, the main contract of LME nickel futures rose sharply, reaching a record high of US $55000 / ton, with a sharp rise of 72.67% in a single day. On March 8, continuing the strong rise, LME nickel once rose to US $101400 / ton, setting a new record.

LME said on Tuesday that all forms of nickel futures contract trading will be suspended at 08:15 London time on March 8 (16:15 Beijing time). As of the closing, LME nickel rose 59% within the day to US $80000 / ton; Later, LME also said that the cancellation of all nickel transactions executed on the OTC and LME select screen trading system on or after 00:00 a.m. UK time on March 8 would delay the delivery of all spot nickel contracts originally scheduled to be delivered on March 9.

With the continuous rise of LME nickel, the short position of Qingshan holdings was forced short, and the event was further fermented.

In the view of many insiders, a major reason for the large loss of Qingshan holdings is that the nickel content of nickel delivery products of LME is not less than 99.8%, while the nickel content of nickel products produced by Qingshan holdings is not up to, so it is difficult to deliver in LME. LME’s delivery materials are mainly nickel sectors and nickel beans. Qingshan’s main products ferronickel (about 10% nickel content) and high nickel matte (about 70% nickel content) cannot be used as the delivery targets.

Why did Qingshan holdings open a large number of empty orders on LME when the spot in hand could not be delivered China Securities Co.Ltd(601066) futures metals analyst Wang Yanqing told China business that Qingshan holdings controls 1 / 3 ~ 1 / 4 of the global nickel production. In order to hedge, it has the power of natural short selling. Although the nickel products of Qingshan holdings cannot be delivered in LME, ferronickel and other products are also priced through lunni, and the selling price of its products has a strong correlation with the price of lunni.

\u3000\u3000 “The situation in Ukraine is a trigger for the risk event of Qingshan holdings, and Russian nickel plays a more important role in the supply of pure nickel. Under the background of the continuous expansion of European and American sanctions, Russian nickel exports are blocked, Qingshan holdings can not buy the corresponding nickel for delivery, and the overall pure nickel inventory is low. When the funds continue to drive up the price of Lun nickel, Qingshan holdings can only make up the deposit.” Wang Yanqing said.

Based on the 200000 ton short position of Qingshan holdings reported by the media, the current price of Lun nickel is US $80000 / ton, so Qingshan holdings will spend US $16 billion. If it is a loss of 10 billion US dollars, can Castle Peak holdings afford it?

In this regard, some brokerage analysts believe that Castle Peak Holdings has a revenue of more than 350 billion yuan in 2021. As a leading enterprise with 20% of the global stainless steel crude steel listed, it has made tens of billions of profits and accumulated for decades. It took root in Indonesia in 2009 and enjoyed the era dividend of laterite nickel ore ferronickel stainless steel. A loss of $10 billion will definitely affect cash flow, but it is not expected to be fatal. However, some futures people believe that $10 billion needs working capital to make up for it, and Qingshan holdings may be in trouble.

According to media reports, Castle Peak Holdings has held a short position in LME nickel for some time. A big question in the market is why Castle Peak holdings did not withdraw after the official outbreak of the situation in Ukraine, and the position has been?

Many people in the futures industry believe that from the perspective of the international situation, it is now a clear card. If Castle Peak holdings does not withdraw its position, it may think that the subsequent price will fall, or it is not predicted that the capital will rise sharply. However, the current risk event also shows that there may be some problems in the risk control of Qingshan holdings. This incident also reminds Chinese enterprises that in extreme cases, it is necessary to do a good job in prediction and risk control.

There is a great risk of a correction in the future price of nickel

Affected by lunni, the main futures contract of Shanghai nickel in China closed the daily limit at the opening of the night after the daily limit on March 7, and closed at 228800 yuan / ton on March 8.

In addition to the thrust of funds, from the perspective of fundamentals, what factors are driving the soaring nickel price and what risks are facing in the future?

“At present, such a high increase of LME nickel has completely deviated from the fundamentals, because the global share of Russian nickel production is relatively small. The main driving force for the rise comes from capital and sentiment. A large number of long investors have entered and formed a very serious squeeze on short positions.” Nanhua Futures Co.Ltd(603093) metals analyst Xia Yingying told China first finance.

Wang Yanqing believes that the situation in Ukraine is the fuse for the sharp rise in nickel prices since March, and Europe and the United States have launched several rounds of sanctions. As the products corresponding to lunni are pure nickel, Russian nickel plays a more important role in the supply of pure nickel. At present, the inventory of pure nickel is low, and the space for supply easing is very limited. Since March, Lun nickel has increased by more than 100%, which is difficult to support the range of supply reduction.

The Shanghai Lun price difference of nickel has continued to expand since the end of February. Wang Yanqing said that the reason for this situation is that China has the opportunity to obtain Russian nickel supply, and China’s supply is expected to be more sufficient than that abroad.

“If Russian nickel enters China and is settled at the price of RMB, and Russian nickel cannot be exported to other countries again, it will naturally lead to a price depression in China’s nickel price, and there is no room for convergence of the internal and external price difference. If Russian nickel is still settled at LME price, the current import window cannot be opened.” He further analyzed that in theory, China can make up for the foreign gap by exporting pure nickel abroad, so as to lower the internal and external price difference, but in fact, China can export very limited nickel, making up for the lack of foreign supply. Over the years, China has been a net importer of nickel.

Xia Yingying believes that in the future, the nickel price spread outside China will first return, and then the two will operate synchronously to a reasonable range. The part that soared on March 8 may be quickly returned in the next few trading days, but the whole process of price decline may last for several weeks.

For the risk factors faced by nickel in the future, Wang Yanqing believes that there are three aspects: first, there is a possibility of easing the situation in Ukraine. Second, the export channel of Russian nickel was opened. At present, Europe and the United States have not directly targeted Russian nickel sanctions, mainly because the fear of market spread makes all parties reluctant to trade with Russian nickel to avoid potential risks. If the export channels of Russian nickel are opened up, including China’s smooth import of Russian nickel, the supply concerns will no longer exist, which will depress the price of nickel. Third, demand has weakened significantly. At present, some downstream enterprises have begun to suspend receiving orders and wait for the price to be clear. If the downstream continues to stagnate and the demand weakens significantly, it will also bring callback risk to the nickel price.

“The current rise in nickel prices has been difficult to explain from a fundamental perspective. Although the overall environment is still conducive to nickel prices, the follow-up risks can not be ignored.” Wang Yanqing said.

Xia Yingying also suggested that in the face of extreme market, the first thing investors should do is to control the risk, reduce the position as much as possible, and even hold short positions to wait and see. Because in the case of great volatility, the exchange will increase the margin, commodity prices are easy to rise and fall sharply, and customers will face the risk of position explosion. At the same time, extreme market is neither trend market nor shock market, which is difficult to operate and easy to cause huge floating losses. Therefore, risk control is particularly important at this moment.

- Advertisment -