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Nickel Market Crisis Sends London Metal Exchange Scrambling to Prevent Damage

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The metals industry, financial regulators and Chinese officials rushed to resolve a crisis in London’s nickel market, which remained on ice after an ill-fated trade sparked mammoth price gains and billions of dollars of losses.

At the center of the action is Chinese nickel titan Tsingshan Holding Group, the world’s biggest producer of a metal used in stainless steel and electric-vehicle batteries. The company, sitting on $8 billion in trading losses, said Wednesday it had secured enough metal to settle all its loss-making positions, according to a state-run media outlet.

Tsingshan couldn’t be reached for comment.

The London Metal Exchange suspended the nickel market early Tuesday, the first time it had paused trading in a metal contract since the collapse of an international tin cartel in 1985. The decision followed a near doubling in prices over a few hours—a run-up traders said had no precedent.

A key unresolved concern for the exchange Wednesday was the ability of Tsingshan and its brokers to meet margin calls and avoid default in the coming days and weeks, a person familiar with the exchange said.

The disorder has ramifications for miners, steelmakers and electric-vehicle makers because LME prices are used as a benchmark in the metals industry. Commodity markets were already in turmoil from the war in Ukraine and punishing sanctions, which have cut supply lines and stifled trading of metals, energy and food, essential to the running of the global economy.

The LME faced criticism from investors and financial traders, who said the decision to cancel trades executed before the suspension caused them to miss out on profits and lose money on paired trades between nickel and other assets.

“Clearly these are unprecedented times and they have called for us to take action we would not wish to have taken,” LME Chief Executive

Matthew Chamberlain

said. “We faced a choice between ensuring the overall and longer-term financial stability of the market, and the shorter-term trading profits of those participants who had traded on Tuesday morning.”

Molten nickel at a plant in Norilsk, Russia. London Metal Exchange prices are used as a benchmark throughout the metals industry.



Photo:

Reuters Staff/REUTERS

In a statement, the U.K.’s Financial Conduct Authority said it was in close contact with the LME and other relevant parties.

Fueling the gains early this week was an effort by brokers which count Tsingshan as a client to buy back nickel contracts they had sold on its behalf. The company had failed to stump up cash to meet margin calls, which mounted as prices rose.

Tsingshan received a financial lifeline to help meet those margin calls. It secured bridge loans from banks including

JPMorgan Chase

& Co. and

China Construction Bank Corp.

, according to people familiar with the matter. Bloomberg earlier reported that Tsingshan had obtained a loan package from domestic and international lenders.

Since Russia invaded Ukraine at the end of February, the U.S. and allied countries have imposed heavy sanctions on Russia. WSJ’s Shelby Holliday dives into how these sanctions are affecting everyone from President Vladimir Putin to everyday Russian citizens. Photo: Pavel Golovkin/Associated Press

Tsingshan has strategic importance to China’s metals industry as a major supplier of nickel and steel. Chinese regulators stepped in and called on domestic banks to help support the company, one of the people said. The fact that Tsingshan’s nickel forward contracts were for normal hedging purposes—and not speculative in nature—helped the company win government support, the person added.

Once prices began to shoot up earlier in the week, traders said, Tsingshan had two ways to unwind the trade: Buy back the forward contracts, or deliver metal against them. The first option was difficult, because it would have had to lock in massive losses.

Even though Tsingshan is the world’s biggest nickel producer, the second option was also tricky. Nickel delivered into LME warehouses must be at least 99.8% pure, a requirement not met by the nickel-pig iron and nickel matte Tsingshan produces in huge quantities.

The company moved to address that dilemma Wednesday. Tsingshan told the Securities Times—a financial paper run by the Communist Party’s flagship People’s Daily newspaper—that it had managed to deploy enough nickel plates for physical delivery. The privately held company said it plans to swap the nickel matte it produces for domestic metal nickel plates that can be used to settle its outstanding contracts.

In a sign Tsingshan’s steps had soothed nerves in the nickel market, prices for some contracts on the Shanghai Futures Exchange fell the maximum 17% Wednesday evening. Previously, some nickel contracts had been suspended for rising by the maximum amount.

The LME has said it would open the market cautiously with a shortened trading day and limits on moves in nickel prices in either direction. It has asked companies with big long positions and big short positions in the metal to pair off those positions, reducing the risk of a further short squeeze. It could resort to forcing the companies to net out their positions, said the person familiar with the exchange.

The LME nickel market disorder has ramifications for miners, steelmakers and electric-vehicle makers which use the metal in batteries.



Photo:

yusuf ahmad/Reuters

Investors on the exchange were furious about the contract cancellations, which they say give an advantage to Tsingshan, its lenders and the LME. One hedge-fund manager said he had cut his positions on the LME by 90% because he couldn’t put clients’ money on the line and risk the trades being canceled.

A point of contention among some bruised traders: The LME is owned by Hong Kong Exchanges and Clearing, and its actions helped buy a major Chinese company and its state-owned lenders time to stem losses.

Mr. Chamberlain said the nationality of the company played no part in the LME’s response to the seizing up of the nickel market. “I can unambiguously say that the nationality of the participant was not a relevant factor here,” he said.

Even if the efforts succeed, the nickel blowup is a black eye for Mr. Chamberlain, who is leaving to join cryptocurrency firm Komainu.

A former UBS Group AG banker who advised Hong Kong Exchanges and Clearing on its 2012 acquisition of the LME, Mr. Chamberlain has sought to make the exchange more amenable to financial players. He tried to draw a new clientele of hedge funds and algorithmic traders to an exchange long dominated by miners and smelters. The strategy aimed to raise volumes in the face of competition from CME Group and Shanghai Futures Exchange.

Write to Rebecca Feng at rebecca.feng@wsj.com, Joe Wallace at Joe.Wallace@wsj.com and Jing Yang at Jing.Yang@wsj.com

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Teladoc Tumbled 38% After Big First-Quarter Loss. Is It Just a Pandemic Play?

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After pandemic drop, Canada’s detention of immigrants rises again By Reuters

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© Reuters. FILE PHOTO: Two closed Canadian border checkpoints are seen after it was announced that the border would close to “non-essential traffic” to combat the spread of novel coronavirus disease (COVID-19) at the U.S.-Canada border crossing at the Thousand Isla

By Anna Mehler Paperny

TORONTO (Reuters) – Canada is locking up more people in immigration detention without charge after the numbers fell during the pandemic, government data obtained by Reuters shows.

Authorities cite an overall rise in foreign travelers amid easing restrictions but lawyers say their detained clients came to Canada years ago.

Canada held 206 people in immigration detention as of March 1, 2022 – a 28% increase compared with March 1 of the previous year. Immigration detainees have not been charged with crimes in Canada and 68% of detainees as of March 1 were locked up because Canada Border Services Agency (CBSA) fears they are “unlikely to appear” at an immigration hearing, according to the data.

The rise puts Canada at odds with Amnesty International and other human rights groups that have urged Ottawa to end its use of indefinite immigration detention, noting CBSA has used factors such as a person’s mental illness as reason to detain them.

A CBSA spokesperson told Reuters that “when the number of entries (to Canada) goes up, an increase in detention is to be expected.” CBSA has said in the past it uses detention as a last resort.

A lawyer told Reuters her detained clients have been in Canada for years.

In the United Kingdom, too, immigration detention levels rose last year after dropping earlier in the pandemic, according to government statistics. Unlike Canada, the United States and Australia, European Union member states have limits on immigration detention and those limits cannot exceed six months.

The rise in detentions puts people at risk of contracting COVID-19 in harsh congregate settings, refugee lawyers say.

Julia Sande, Human Rights Law and Policy Campaigner with Amnesty, called the increase in detentions “disappointing but not surprising,” although she was reluctant to draw conclusions from limited data.

The number of immigration detainees in Canada dropped early in the pandemic, from a daily average of 301 in the fourth quarter (January through March) of 2019-20 to 126 in the first quarter (April through June) of 2020-21.

FEW NO-SHOWS AS DETENTIONS DROPPED

Detaining fewer people did not result in a significant increase in no-shows at immigration hearings – the most common reason for detention, according to Immigration and Refugee Board data.

The average number of no-shows as a percentage of admissibility hearings was about 5.5% in 2021, according to that data, compared to about 5.9% in 2019.

No-shows rose as high as 16% in October 2020, but a spokesperson for the Immigration and Refugee Board said this was due to people not receiving notifications when their hearings resumed after a pause in the pandemic.

Refugee lawyer Andrew Brouwer said the decline in detention earlier in the pandemic shows Canada does not need to lock up as many non-citizens.

“We didn’t see a bunch of no-shows. We didn’t see the sky fall … It for sure shows that the system can operate without throwing people in jail,” Brouwer said.

He added that detainees face harsh pandemic conditions in provincial jails – including extended lockdowns, sometimes with three people in a cell for 23 hours a day.

Refugee lawyer Swathi Sekhar said CBSA officials and the Immigration and Refugee Board members reviewing detentions took the risk of COVID-19 into account when deciding whether someone should be detained earlier in the pandemic but are doing so less now.

“Their position is that COVID is not a factor that should weigh in favor of release,” she said.

“We also see very, very perverse findings … [decision-makers] outright saying that individuals are going to be safer in jail.”

The Immigration and Refugee Board did not immediately respond to a Reuters request for comment.

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Nasdaq futures rise as market attempts comeback from April sell-off, Meta shares soar

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Stock futures rose in overnight trading as the market shook off the April sell-off and investors reacted positively to earnings from Meta Platforms.

Futures on the Dow Jones Industrial Average added 70 points or 0.2%. S&P 500 futures gained 0.7% and Nasdaq 100 futures jumped 1.2%.

The moves came as shares of Meta surged more than 18% after hours following a beat on earnings but a miss on revenue, a sign that investors may see signs of relief in the beaten-up tech sector. Shares were down 48% on the year heading into the results.

Meanwhile, shares of Qualcomm gained 5.6% in extended trading on the back of strong earnings while PayPal rose 5% despite issuing weak guidance for the second quarter.

“I think a lot of people want to believe that earnings are going to pull us out of this, but earnings are not what got us into this,” SoFi’s Liz Young told CNBC’s “Closing Bell: Overtime” on Wednesday. “… But the reality is there are so many macro headwinds still in front of us in the next 60 days that the market is just hard to impress.”

The after-hour activity followed a volatile regular trading session that saw the Nasdaq Composite stoop to its lowest level in 2022, as stocks looked to bounce back from a tech-led April sell-off. The index is down more than 12% since the start of April.

In Wednesday’s regular trading, the tech-heavy Nasdaq ended at 12,488.93, after rising to 1.7% at session highs. The Dow Jones Industrial Average rose 61.75 points, or 0.2%, to 33,301.93 propped up by gains from Visa and Microsoft, while the S&P 500 added 0.2% to 4,183.96.

Investors await big tech earnings on Thursday from Apple, Amazon and Twitter, along with results from Robinhood. Jobless claims are also due out Thursday.

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