China’s Tsingshan Holding Group has reached an agreement with banks under which they will not make margin calls on or close out the producer’s nickel positions on the London Metal Exchange (LME) in a move that could help calm markets.
During the standstill agreement, the company and banks will discuss a standby secured liquidity facility, Tsingshan said. It did not provide any other details, such as how long the standstill period would last.
JPMorgan Chase & Co and other banks were negotiating over the weekend with Tsingshan Group on an agreement that would give the nickel producer time to work out how to pay margins on its short nickel positions, according to a source familiar with the matter.
The banks could potentially earn money on a bridge loan secured by future nickel production if Tsingshan paid them back over time as it produced nickel.
The Wall Street Journal, which previously reported on the talks, also said Standard Chartered and BNP Paribas were among the banks looking to reach an agreement.
The banks declined comment or did not respond to a request for comment.
Nickel prices on the LME jumped to record highs above $100,000 a tonne on March 8 as Tsingshan bought large amounts to reduce its short positions in the metal, which is used to make stainless steel and electric vehicle batteries.
The LME was forced to suspend nickel trading for the first time since 1988 on March 8 and is trying to facilitate negotiations to net off long and short positions in order to reopen the market.
Metal industry sources said that for the duration of the standstill agreement Tsingshan, the world’s largest nickel producer, may not have to buy any more metal to cover its short positions.
The arrangement will also help pave the way for the London Metal Exchange to restart nickel trading, they said.
Britain’s Financial Conduct Authority (FCA) and the Bank of England are talking to the LME about the resumption of a fair and orderly market in nickel, the FCA said.
- Reuters, with additional editing by George Russell
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