The Big Banks worked over the weekend to resolve the nickel market crises that left them on the hook for billions of dollars owed by a Chinese metals giant, reported WSJ. JPMorgan Chase & Co JPM, Standard Chartered PLC SCBFF, and BNP Paribas SA BNPQY were among the banks and brokers seeking to reach an agreement with Tsingshan Holding Group, stated people familiar with the discussions.
What Happened: The meltdown bled into the financial system, leaving Tsingshan's banks and brokers with several billion dollars in the unpaid margin, the upfront cash brokers require to make trades, stated people familiar with the discussions.
Why It's Important: The talks between Tsingshan's creditors, led by JPMorgan, focused on extending the company's credit lines so that it can pay them the margin it owes, states people familiar with the discussions. One plan under discussion was to secure this lending against Tsingshan's steel and nickel assets in China and Indonesia.
Despite Tsingshan's troubles, with nickel prices close to records, extending such credit could be highly profitable given the company's vast production capabilities, stated people familiar with the situation.
Tsingshan, a stainless-steel producer, solved China's nickel shortfall by pioneering rotary-kiln electric furnaces to produce a low-cost material known as nickel-pig iron.
Early in 2021, Tsingshan began to accumulate a short position. It made statements on its website and panels suggesting the market was flush and prices should fall.
Tsingshan's position was equivalent to selling about 190,000 metric tons on the LME, traders, bankers, and analysts estimate. That would be worth $9.1 billion at last Monday's closing prices.
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