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A sector that was once racing to build new supply has been closing mines and deferring projects as low prices bite into the cost curve.
Banks led by JPMorgan Chase & Co. are in advanced talks for a loan facility to backstop Xiang Guangda’s short position in nickel, in an attempt to restore stability to the market after an unprecedented squeeze.
The deal would allow Xiang to maintain his short position, which has roiled the nickel market after he struggled to pay massive margin calls to banks and brokers last week. If it goes ahead, the loan could give the London Metal Exchange the certainty it needs to reopen the nickel market, which has been suspended since last Tuesday morning.
Under the deal being discussed, the roughly 10 banks that were Xiang’s counterparts for his nickel bet would extend enough credit to cover his mark-to-market losses, according to people familiar with the matter. Crucially, they would also provide a loan facility to allow Xiang to meet future margin calls should the nickel price increase further.
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In exchange, Xiang is offering the banks security over a wide range of assets held by his company Tsingshan Group Holding Co., the world’s top nickel and stainless steel producer, the people said, asking not to be identified as the discussions are private.
JPMorgan and the LME declined to comment. A Tsingshan representative had no immediate comment. JPMorgan is the largest counterparty to Xiang’s nickel short positions, Bloomberg reported last week.
To be sure, talks between Xiang and the banks are ongoing, and there’s no guarantee the deal will go ahead in its current form.
Still, several people with knowledge of the discussions said that banks were currently poring over drafts of the agreement, and that it could be finalized within the next few hours or days.
(By Jack Farchy, Alfred Cang and Isis Almeida, with assistance from Mark Burton)
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