An analysis of Tsingshan Holding Group Cos Big Short Position on Nickel Futures

Abstract

This paper analyzes the case study of the worlds largest nickel producer: Tsingshan Hold-ing Groups $8 Billion trading loss. We examine Tsingshans 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 Tsingshans 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, Tsingshans 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 LMEs ability to regulate OTC trading, and the second was Tsingshans poor liquidity management which put them in a vulnerable po-sition.