Chinese nickel giant Tsingshan has reached a deal with its banks to establish a «standstill period», allowing it more time to reduce short positions.
Tsingshan’s banks agreed they won’t close out any of the firm’s positions nor make further margin calls during a standstill period, according to a statement from the Chinese nickel giant yesterday.
And on Tsingshan’s side of the agreement, it will reduce its positions «in a fair and orderly manner as abnormal market conditions subside».
This could mark the end of a chapter for the nickel fiasco which saw the London Metal Exchange (LME) attempt to close out short positions by matching them with long ones last week before failing to garner significant interest. This was followed by founder Xiang Guangda’s reported unwillingness to cut short positions.
Tsingshan Banks
The agreement is being led by J.P. Morgan, reportedly the largest counterparty to Tsingshan’s nickel trades with exposure to 50,000 out of the over 150,000 tons held through an over-the-counter position.
Other banks and brokers involved include BNP Paribas, Standard Chartered Bank, CCB International, UOB, DBS, BOC International and brokerage Sucden Financial.
LME Reopening
Meanwhile, the LME said it would resume nickel trading on Wednesday and roll out new rules to prevent major swings in the future including daily price limits across metals.
In addition, LME is also reviewing trading activity and market conditions from last week and may open a formal investigation.
It said it will require all brokers to disclose their clients’ positions in nickel that were larger than 600 tons and potentially question their rationale for the positions.
