China’s Tsingshan agrees standstill agreement on LME nickel margins

LONDON: 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), the company said on Monday, a move sources said should help calm the market.

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. 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 the pave the way for the London Metal Exchange to restart nickel trading, they said.