Chinese tycoon’s ‘big short’ in nickel skyrockets Tsingshan’s miracle growth

FILE PHOTO: The offices where the London Metal Exchange is headquartered are seen in the City of London
FILE PHOTO: The offices where the London Metal Exchange is headquartered are seen in the City of London, Britain January 18, 2018 REUTERS/Peter Nicholls

March 13, 2022

By Praveen Menon, Min Zhang and Fransiska Nagoy

(Reuters) – Chinese tycoon Xiang Guangda must find a way to bail out his Tsingshan Holding Group after his bet on the price of nickel failed, increasing volatility in a metal essential to the electric vehicle industry.

One of the world’s largest nickel producers is facing massive losses on its short positions after prices surged above $100,000 a tonne last week, forcing the London Metal Exchange to suspend nickel trading.

Tsingshan must either repay the outstanding short positions, which could be as high as $8 billion, or demonstrate that it has sufficient deliverable nickel to repay it in kind.

Beijing could step in to save Tsingshan, a source familiar with the matter told Reuters. China could swap some of its high-grade nickel reserves for low-grade nickel pig iron (NPI) that Tsingshan produces to meet LME quality standards. According to two analysts, China holds an estimated 100,000 tons of nickel in government stocks.

Tsingshan and China’s State Reserve Administration did not respond to requests for comment.

Tsingshan has previously contributed to market volatility.

Last year it triggered a price drop with surprising news that it would supply battery material manufacturers with matte nickel, potentially solving a key EV bottleneck by increasing the supply of battery quality in a cheaper way.

Betting prices would fall, Tsingshan started building a short position last year. The bet partially backfired as Russia’s invasion of Ukraine sent metals prices higher and pressured holders of large short positions, including Tsingshan.

“Markets sensed that (Tsingshan) was going to make a move, but they probably made it too soon…a quarter or so early, and no one anticipated what happened in Ukraine,” said Angela Durrant, senior nickel analyst by Wood Mackenzie.

Tsingshan has hinted that foreign elements could push up nickel prices.

“Foreigners have some actions and we are actively coordinating [with related parties]China Business News quoted Xiang as saying on March 8.

The market turmoil has not affected Tsingshan’s Indonesian operations, a mining source familiar with the matter told Reuters.

For Indonesia, Tsingshan is a vehicle to fulfill its ambition to become a one-stop shop for EV battery ingredients, and the company has been rolling out projects at lightning speed. Western firms often privately complained about the access and resources Tsingshan received in the country.

“The government has ambitions in Indonesia, they want to build the hub for batteries for electric cars. So you see the policy as being to support the industry,” the source said. “We are affected by COVID but not affected by it (brief exposure).”

Tsingshan is also seen in Southeast Asia as the flagship for China’s Belt and Road Initiative, President Xi Jinping’s extensive infrastructure program.

Unlike the privately owned Tsingshan, several high-profile projects run by state-backed Chinese companies have been mothballed due to concerns about overpricing, corruption and debt sustainability.


Founded in Wenzhou in 1988, Tsingshan began with the production of stainless steel and the manufacture of automobile windows and doors.

But his fortunes changed when Xiang, 64, began exploring Indonesian markets in 2009. Over the next decade, it rocked the global nickel industry with low-cost nickel pig iron.

It set up plants in Indonesia, the world’s largest nickel producer, with production ranging from nickel sulfate to nickel matte, an intermediate product that can be used in both stainless steel and batteries. Tsingshan is at the forefront of Indonesia’s two major nickel hubs, including the Morowali Industrial Park, which employs over 40,000 people and covers 5,000 hectares with an airport, mineral processing plants, a port and a hotel for upscale visitors.

The Sulawesi facilities are expected to produce 850,000 tonnes of nickel equivalent this year and 1.1 million tonnes in 2023.

“In 2015 there was nothing on that side … so they did something absolutely wonderful,” Durrant said. “Getting away from the Chinese higher power (costs) and moving everything to Indonesia was a feat for them.”

The industry credits Xiang for much of this success.

He became known as a disruptor who “could take the world by storm,” said Steven Brown, an independent nickel consultant in Canberra who spent two days touring Tsingshan’s production facilities with Xiang in 2014.

Xiang opposes high nickel prices and is determined to be a low-cost producer of nickel and stainless steel, Brown said.

“I don’t think this crisis will lead to too much change in Tsingshan’s strategy,” he added.

Market sources said that although Tsingshan has reduced exposure, it is unlikely that all of its positions are fully covered.

China’s state-backed Securities Daily said March 9 that Tsingshan had provided “enough spot products” for delivery by replacing its nickel matte with nickel plate in the domestic market.

The LME enables the supply of nickel cathodes, including plates, and briquettes.

“There aren’t many spot nickel products on the market, it’s not even likely that Tsingshan could get 100,000 tons,” said a Guangdong-based analyst who asked not to be identified.

(Additional reporting by Ed Davies and Dominique Patton; Editing by Diane Craft) Chinese tycoon’s ‘big short’ in nickel skyrockets Tsingshan’s miracle growth


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