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A Chinese Steel Giant Is Upsetting the Global Nickel Market

A Chinese Steel Giant Is Upsetting the Global Nickel Market


News is brought to you by Mr. Shailesh Karia


Published on 1st November, 2019


Behind one of China’s biggest industrial companies is a husband and wife team that reinvented how to make stainless steel.


With cheaper production techniques, Xiang Guangda and his wife He Xiuqin helped change the industry in less than two decades — turning Tsingshan Holding Group Co. into a company that churns out a fifth of the world’s stainless steel and creating a billion-dollar fortune. Now it’s making waves in a different market: the London Metal Exchange.


While Tsingshan and the couple keep a low public profile, they were the talk of LME Week in London, with traders speculating on the company’s role in drawing down large quantities of metal from warehouses tracked by the LME. Tsingshan, which is privately held, says it needs the material to feed factories in China when Indonesia shuts off exports of nickel ore in January.


“There are more conspiracy theories than dinner attendees regarding what is happening in the nickel market,” Malcolm Freeman, a director at Kingdom Futures, said in an email after the annual LME Dinner in London.


In the span of two months, more than half of the nickel in the exchange network — a system designed as a last-resort for traders and hedgers — has been withdrawn, with Tsingshan said to be a key driver behind the decline in stockpiles. Inventories are the lowest in 11 years and nickel prices are up 56% this year. 


Other indicators suggest there’s plenty of supply in the physical market. For example, LME nickel prices now exceed those in China, the world`s top consumer of the metal, for the first time in data going back to 2015. 


The LME opened a review last month into trading in the nickel market, asking members for more details of “significant client activity.” The exchange may open a formal investigation into the issue if it finds evidence of any rule violations, said a person familiar with the matter, who asked not to be identified. No one has been accused of any wrongdoing.


Xiang and He declined to be interviewed for this story, but Tsingshan did provide written replies to questions. Xiang is chairman, while He is a director and the biggest shareholder in Golden Harbour International Pte., the company’s Singapore unit. Tsingshan isn’t a member of the LME.


Xiang and He got their big break in the late 1980s with a business making frames for car doors and windows in China’s eastern city of Wenzhou. In 1992, they moved into stainless steel, an alloy of iron, chromium and other metals like nickel. As China’s economy steamed ahead, the business grew quickly. In 1998, the company was named Tsingshan, which means “green mountain.” 


Source : https://www.bloomberg.com//


 





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