“Raw material prices jumped after the war in Ukraine. This is the case of nickel that peaked at over $100,000 per ton. On Tuesday, the London Metal Exchange suspended nickel trading to calm the storm. According to Bloomberg, the situation hit Chinese nickel tycoon Xiang Guanda hard.
The “big shot,” as he is known in financial circles, has been in high positions in nickel for several months, betting on the fall in the price of this silvery metal used to make stainless steel and batteries for electric vehicles. Faced with rising demand due to electric vehicles, the price has already risen by more than 30% in 2019, 20% in 2020 and then 25% in 2021.
But bad luck, its price has tripled in two days, a level that has not been seen in 145 years, when the institution was born. The escalation of the conflict in Ukraine and the prospects for sanctions against Russian raw materials are in question. Russia is the third largest nickel producer in the world with 13% of mining capacity in 2021 after Indonesia and the Philippines.
By making a mistake in strategy, Xiang Guangda, head of Tsingshan, the Chinese nickel giant, is causing his company to lose billions of dollars. He is also dragging his broker, China Construction Bank, who has received a reprieve from the London Metal Exchange to try to minimize the damage.
In the image it gives this…
BOOM!!! Nickel prices jumped above $100,000 a ton due to a huge shortage of the metal. The London Metal Exchange transferred a division of China Construction Bank Corp. extra time to pay the $$$$ margin call she missed on Monday. Subscribe @jfarchy for more info and read this https://t.co/4lO5xbW3ph pic.twitter.com/BWaJodhiGC
— Javier Blas (@JavierBlas) March 8, 2022
When you short sell, that is, you sell today at today’s price, a product that you do not yet own and that you will have to buy later in order to be able to deliver what you have sold, you are bound at the time of the contract. contract for the supply of the quantity sold. So you have to “buy” by all means what you don’t have!
In this case, prices soar, and it is usually in this situation that the “financiers” can go bankrupt.
Speculation is always risky.
Charles SANNAT
“This article is for the press, that is, free from reproduction in whole or in part, provided that this paragraph is reproduced after it. Insolentiae.com is a site where Charles Sannat speaks his mind daily and provides brash and uncompromising analysis of economic news. Thank you for visiting my site. You can subscribe to the daily newsletter free of charge at www.insolentiae.com. »
RFI source here