The game of Xiang Guangda, China’s “Nickel King”, was to use his influential market position to short the metal, wait for the price to fall, and then sniff the rewards when the value bounced back.
But then Russian President Vladimir Putin invaded Ukraine and things got complicated — fast.
Russia is one of the world’s largest producers of nickel ore, an important component of batteries for electric vehicles.
As shocking Western sanctions slammed into the invasion, the price of the silver-white metal rocketed to an all-time high of over $100,000 a ton.
That was too high for Xiang and the entire metals industry, forcing the 145-year-old London Metals Exchange (LME) to suspend trading for a week and nickel-dependent manufacturers struggled to handle the spike in costs.
Stuck in positions — reports estimate it held at least 100,000 tons — Xiang’s company Tsingshan Holdings Group was suddenly on the hook for billions of dollars.
Tsingshan, the world’s largest nickel producer, has been forced to buy back a large number of nickel contracts at higher prices to reduce its exposure.
A Bloomberg News report estimates the buyback contributed to a loss of $8 billion, suggesting the company may need a bailout from Chinese authorities.
“Xiang is a smart player, but he was caught off guard by the Russian issue,” said Li Bin, a nickel dealer in Shanghai.
When nickel trading resumed last week, prices fell to about $37,200 a tonne — still 50 percent higher than in February — as volatility swept through the market.
“After the historical tightness, nickel is still struggling to find a price,” said Susan Zou, senior metals analyst at Rystad Energy.
– Homemade Tycoon –
The market for nickel, essential for making batteries for EVs and a key alloy in stainless steel, is dominated by a handful of players.
Those include Tsingshan, which is headquartered on the east coast of China.
It was founded by Xiang, a self-made billionaire known among Chinese nickel traders as the “Nickel King” and “Big Shot”.
Xiang started his career as a mechanic in a state fishery and now owns two sprawling nickel production centers in Indonesia.
These include the 2,000-hectare Morowali industrial park with 44,000 employees and its own airport and is seen as a guarantee of a cheap supply of ore for Tsingshan’s furnaces on the Chinese side.
After his short went wrong, Tsingshan must either pay off its debts or prove it has enough nickel to pay back in kind.
“We are closely monitoring his next move as it could still shake the markets,” said Li, the nickel trader in Shanghai.
Those rising costs are already being felt by EV makers, including Tesla and 20 other Chinese rivals such as Xpeng and BYD, all of which have raised car prices in the past two weeks due to a rise in raw material costs.
“The price and supply shocks have prompted major battery makers to seek alternative metals to power electric vehicles,” said analyst Zou.
– Beijing to the rescue? †
Beijing could intervene to save Tsingshan, Chinese media outlets, including financial news site Yicai, reported, citing sources familiar with the matter.
There are discussions about allowing the company to swap its low-grade nickel products that don’t meet LME’s quality standards with a purer form of the metal in state inventories to settle its claims, Yicai said.
According to official data, China is estimated to have about 100,000 tons of nickel in state reserves. Tsingshan and the Chinese State Reserves Administration did not respond to requests for comment.
Xiang has moved markets before, most notably in 2018 when he launched large quantities of nickel pig iron, a low-cost alternative to pure nickel, which can be used to make stainless steel.
“Xiang has always believed that because he is one of the world’s largest players with ultra-low costs, he could keep the nickel price under control,” said a former Tsingshan employee, who declined to be named.
“He has always bet on a drop in the nickel price, because his production costs in Indonesia are only $10,000 per ton.”
Now Xiang must decide if he wants to settle his bet slowly and at what price.
On March 14, Tsingshan said it had reached an agreement with banks to hold the company’s nickel holdings, indicating the billionaire was on his tail to get out of the crisis.
That could further beat the LME and lead to more nickel price uncertainty, trader Li said, and create challenges for battery makers trying to replace gasoline cars.
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