Chinese entrepreneur and Tsingshan founder Xiang Gungda is reportedly at the center of a historic short squeeze of nickel prices that saw the industrial giant shoulder billions of dollars in paper losses.
Exacerbated by a materials rush due to the Russian invasion of Ukraine, nickel prices more than doubled earlier this week and placed pressure on short-sellers.
The most notable holder of short positions is Tsingshan Holdings – one of the world’s largest nickel and stainless steel producers – which is believed to own positions on about 100,000 tons of nickel with paper losses totaling up to $8 billion before the London Metal Exchange halted trading.
Who is Xiang Guangda?
Tsingshan founder Xiang Guangda was born in 1958 in Wenzhou, a city in the southeastern Zhejiang province renowned for producing entrepreneurs.
Born into a family of ordinary workers, Xiang began his career in 1980 at a fishery company in his hometown as an ordinary mechanic before later being promoted to a workshop director.
He would go on to make his first riches through the establishment of an automobile doors and windows workshop in 1986 with his relative, Zhang Jimin.
Tsingshan Holdings Group
In 1988, Xiang would give up his job at a state-owned enterprise to become a full-time entrepreneur and founded Tsingshan, which translates to «green mountain», alongside Zhang and several other relatives.
Tsingshan’s subsequent rise in the steelmaking industry would be attributed not only to the timing of its entry when China was heavily reliant on imports but also its deep focus on specialization – many competitors would later flock to the booming real estate sector to capitalize on other opportunities such as property construction.
«The better the company, the simpler it is,» Xiang was once quoted as saying with regards to his views on specialization. «When you mention Mercedes-Benz, you know that it is the benchmark in the automotive industry; when you mention Apple, everyone knows that they are very good at making electronic products; when you mention Coca-Cola, it is a company that focuses on beverages.»
«Big Shot»
Tsingshan eventually became a global leader in the industrial sector with production plants in Indonesia, India and Zimbabwe.
Xiang’s rise would earn him the nickname «Big Shot» in Chinese commodities circles and according to «Forbes» and «Hurun», his wealth prior to the incident is estimated to be between $1.2 billion and $4.2 billion.
Nickel Short Squeeze
Tsingshan began building short positions on nickel last year and according to a «Bloomberg» report last month citing a source familiar with the matter, this was due to Xiang’s desire to hedge against what he thought at the time would be the end of the metal’s price rise.
This would ultimately result in billions of dollars in paper losses, though Tsingshan has now reportedly secured a lifeline in the form of loan packages from local and intentional lenders including J.P. Morgan and China Construction Bank.
Unidentified Stockpiler
Interestingly, Xiang also faced another major whale on the other side of the betting table.
The unidentified nickel stockpiler controls between 50 and 80 percent of nickel warehouse warrants monitored by the LME, according to daily data from the exchange.
