JPMorgan Leads Nickel Talks, Largest Counterparty to Tycoon’s Big Short

  • JPMorgan is caught in the nickel short squeeze as the biggest counterparty to a Chinese tycoon’s trades, Bloomberg reported.
  • Trades by Xiang contributed to a surge in nickel above $100,000 a ton last week, prompting an LME halt to trading.
  • JPMorgan is leading talks between Xiang’s company Tsingshan and its creditors to resolve its struggle to pay the margin owed.

JPMorgan is the largest counterparty to nickel trades by the Chinese tycoon who faces billions of dollars in losses from a big short bet, according to a Bloomberg report.

Xiang Guangda has a total short position of more than 150,000 tons of nickel. About 50,000 tons of that is held through an over-the-counter position with JPMorgan, Bloomberg reported Friday.

That means Xiang’s metals company, Tsingshan Holding Group, is on the hook for about $1 billion in margin with the bank, based on those figures. Tsingshan has been finding it difficult to pay margin calls to its creditors, the report said.

Short-covering trades made last week by the Chinese billionaire contributed to a swift, huge surge in nickel prices that saw the commodity briefly top more than $100,000 a ton. To contain the massive short squeeze, the London Metal Exchange halted trading Tuesday, and it was still suspended Monday.

Over the weekend, JPMorgan spearheaded discussions between Tsingshan and the banks and brokers involved, the Wall Street Journal reported. They are looking to find ways to extend their credit lines to the Chinese company so it can pay the money it owes to them, it said.

The nine or so other banks and brokers involved reportedly include Standard Chartered, BNP Paribas, China Construction Bank International, and Sucden Financial.

Tsingshan’s banks and brokers stand to lose billions of dollars if the nickel producer doesn’t follow through with its commitments, as they themselves have to meet margin calls on the losing position with the LME.

The LME last week canceled trades made during the run-up in prices before the halt of trading — an estimated $3.9 billion in transactions — to ease the pressure from margin calls.  

But Xiang has vowed to keep shorting nickel, in the hope the price will move lower and his potential losses will be reduced. He has also proposed pledging Tsingshan’s assets in Indonesia as collateral for the money it owes in margin calls, Bloomberg reported.

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