With the Nickel market shuttered after a Chinese stainless steel tycoon was caught with a historic, potentially fatal $8 billion margin call hanging over its head, today the London Metal Exchange announced that it will reopen its nickel market on Wednesday, more than a week after it was closed last Monday, after the Chinese company at the center of the epic short squeeze was bailed out by a consortium of banks led by JPMorgan which is also the largest counterparty to the short (for a detailed breakdown read "The 18 Minutes of Trading Chaos That Broke the Nickel Market") .
Trading in nickel will resume after Xiang Guangda, whose massive short position equivalent to approximately 150,000 tons of nickel, sent shockwaves across the commodity market last week, announced a standstill with his banks to avoid further margin calls as Bloomberg first reported earlier. Xiang’s Tsingshan Group had been in discussions with banks led by JPMorgan about a loan facility to backstop his short position and said Monday that talks on the funding would continue during the standstill period. As a reminder, Xiang is JPMorgan's largest counterparty, and owes Jamie Dimon several billion, money which the largest US bank would not receive unless it bailed out the Chinese firm.
Here is the statement from the LME:
This Notice: (i) confirms that trading in LME Nickel Contracts will resume at 08:00 London time on Wednesday 16 March 2022 (“Resumption Date”) on all LME Execution Venues; (ii) sets out details of the application of daily upper and lower price limits to all outright Contracts in all Base Metals on all Execution Venues; (iii) sets out details of the deferral of delivery to Wednesday 23 March at level for all Nickel Contracts entered into prior to Wednesday 16 March and due for delivery between Wednesday 16 and Tuesday 22 March inclusive; (iv) details the Accountability Levels that shall apply to Nickel Contracts with effect from the Resumption Date and outlines information gathering measures that shall apply to Members in relation to aggregate on-exchange and OTC Nickel positions; and (v) provides additional guidance on the LME’s approach to the determination and publication of Official Prices and Closing Prices during any period
The discredited, Hong Kong-owned London Metals Exchange also announced that it would impose 15% limit on daily price moves across all metals - which will come in useful on Wednesday when nickel either explodes higher yet again in hopes of further squeezing Tsingshan, or crashes.
The exchange also said that it would require traders' nickel positions to be reported going forward, something it should have thought of long ago.
Last week the LME attempted a bizarre process to try to close out short positions by matching market participants with long and short positions before the market reopened, but received little interest especially after Xiang told the banks and brokers last week that he would like to keep his short position, sparking fears that the short squeeze could continue as a GME scenario could emerge as specs sought to push the price even higher.