Chinese Nickel Tycoon Reaches Standstill Deal On Massive Margin Call

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by Tyler Durden
Monday, Mar 14, 2022 - 05:46 PM

It appears that JPMorgan has finally reached a deal to bail out the Chinese tycoon which is also its biggest Nickel short counterparty.

While by now most are probaly tired of the neverending Nickel saga on the LME, which has been exposed as a joke of a market catering to whale Chinese clients to avoid angering its Hong Kong (read China) owners, moments ago Bloomberg reported that Tsingshan has reached an agreement with a consortium of hedge bank creditors on a standstill arrangement, according to statement.

The report notes that in the course of the standstill period, "Tsingshan and banks will progress discussions on a standby secured liquidity facility intended principally for Tsingshan’s nickel margin and settlement requirements." Additionally, for the period of the standstill, the participating hedge banks agree not to close out positions against Tsingshan or to make further margin calls in respect of existing positions.

The agreement includes provision for the existing hedge positions to be reduced by Tsingshan in a fair and orderly manner as abnormal market conditions subside.

In other words, Tsingshan has been ring-fenced from the broader market, and it is likely that the LME may soon resume Nickel trading.

The deal follows an earlier report according to which banks led by JPMorgan were in advanced talks for a loan facility to backstop Xiang Guangda’s short position in nickel, "in an attempt to restore stability to the market after an unprecedented squeeze."

The deal would allow Xiang to maintain his short position, which has roiled the nickel market after he struggled to pay massive margin calls to banks and brokers last week. If it goes ahead, the loan could give the London Metal Exchange the certainty it needs to reopen the nickel market, which has been suspended since last Tuesday morning.

As reported earlier, under the deal being discussed, the roughly 10 banks that were Xiang’s counterparts for his nickel bet would extend enough credit to cover his mark-to-market losses, and would also provide a loan facility to allow Xiang to meet future margin calls should the nickel price increase further.

In exchange, Xiang is offering the banks security over a wide range of assets held by his company Tsingshan Group Holding Co., the world’s top nickel and stainless steel producer, the people said, asking not to be identified as the discussions are private.

The question now is whether once the Nickel market resumes, if we get a GME-rerun where specs seek to slam the price of Nickel even higher to force Tsingshan, now in concert with its banks who are effectively all in the same trade going forward, to eventually crack and force the cartel to cover at even higher prices.