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An analysis of Tsingshan Holding Group Co’s Big Short Position on Nickel Futures
- 1 University of Edinburgh
- 2 University of Edinburgh
- 3 Wuhan University
- 4 Miami University
* Author to whom correspondence should be addressed.
Abstract
This paper analyzes the case study of the world’s largest nickel producer: Tsingshan Hold-ing Group’s $8 Billion trading loss. We examine Tsingshan’s trading position before and after the surge in nickel prices to better understand the rationale behind their decision to short 200,000 tons of nickel futures mostly on the London Metal Exchange. Moreover, this paper outlines the impact of Tsingshan’s trading loss on their various stakeholders. For in-stance, the rise of almost 250% in nickel futures resulted in the LME suspending all nickel trading on March 8th 2022 meanwhile creating a large liquidity crisis for the LME. On the other hand, Tsingshan’s broker China Construction Bank Corp and their largest counterpar-ty JP Morgan Chase provided large sums of loan packages so that Tsingshan could avoid defaulting on meeting their margin calls. We concluded that the case study revealed vari-ous underlying issues. One was the failure of LME’s ability to regulate OTC trading, and the second was Tsingshan’s poor liquidity management which put them in a vulnerable po-sition.
Keywords
Tsingshan Holding Group, margin call, nickel futures, LME, CCB, JP Morgan
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Cite this article
Wang,G.;Zhao,H.;Zhang,Z.;Wu,S. (2023). An analysis of Tsingshan Holding Group Co’s Big Short Position on Nickel Futures. Advances in Economics, Management and Political Sciences,17,324-332.
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Volume title: Proceedings of the 2nd International Conference on Business and Policy Studies
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