Chinese tycoon faces multi-billion dollar hit after nickel prices spike

A Chinese tycoon who had bet big against nickel is now facing billions of dollars in losses.

Entrepreneur Xiang Guangda, known as “Big Shot”, had held a substantial short position in nickel, Bloomberg reported.

It is now under pressure from brokers to make huge “margin call” collateral payments to demonstrate it can cover expected losses.

Some large producers who hold nickel short contracts to protect against price declines will also have suffered losses, but these will likely be covered by the increase in the sale value of the metal itself.

Will Adams of Fastmarkets, a commodity pricing agency, said the increase was “probably a spike”.

“With most of the buying pressure likely coming from struggling shorts needing to cover their positions on exchanges, compounded by fears over supply from Russia and low levels of visible inventory on the LME, prices should fall back before too long,” he said.

The LME suspension echoes the ‘tin crisis’ of 1985, when a number of brokers were forced out of business after the contract for the metal was suspended following the collapse of the tin cartel .

Russia supplies about a tenth of the world’s nickel, mainly for stainless steel and batteries for electric vehicles.

Trading will not resume on Tuesday but could remain suspended for several days. The LME said the situation in Russia and Ukraine had particularly affected nickel trading and it had suspended transactions to maintain an orderly market.

“The LME will actively plan for the reopening of the nickel market and announce the mechanics to the market as soon as possible,” he said. “The LME will consider a possible multi-day shutdown, given the geopolitical situation underlying recent price movements.”

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