JPMorgan is the largest counterparty of the nickel 'big short' and is leading talks to contain the damage to the market: reports
JPMorganis caught in the nickel short squeezeas the biggest counterparty to a Chinese tycoon's trades, Bloomberg reported.
- Trades by Xiang contributed to a surge in
nickelabove $100,000 a ton last week, prompting an LME halt to trading.
JPMorgan is the largest counterparty to nickel trades by the Chinese tycoon who faces billions of dollars in losses from a big
That means Xiang's metals company,
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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