Did Xiang Guangda, who didn't accept his fate after five consecutive falls, hold up?

"it will only be acceptable to downstream manufacturers if it is at least less than US $30,000 / ton. When the price of nickel reaches less than US $20,000 / ton, the price of nickel will be beneficial to the development of the downstream industry. " Wang Cong, director of SMM big data, said that falling below 30, 000 US dollars per ton means that Lunni prices are gradually returning to a reasonable range.

Zheshang Futures: Jiang Xinbin, senior analyst of non-ferrous metals, believes that as Castle Peak announced that it will replace some nickel beans through high nickel matte, the market expects that Castle Peak will be able to participate in the follow-up delivery link, and the probability of bullish positions has dropped significantly. As a result, the price of Lunni has fallen sharply. From the analysis of the current market operation, the follow-up Lunni price is expected to continue to fall.

Xiang Guangda, who does not accept his fate, may have held up again this time.

March 22, Lunni futures ushered in five consecutive falls, falling below the $30,000 / ton mark. By the close of the day, the LME Composite Nickel 3M contract was down 9.23% at US $28500 / tonne, and Lunni prices were back near their opening price on March 7.

Silent protocol becomes a turning point

Prior to this, the price of Lunni futures soared all the way, rising to 100000 US dollars / ton at one point, and many analysts judged that the two important nodes of its future development are: does Castle Peak have enough funds for margin? Is there enough stock for delivery?

Judging from the relevant statement on March 15, the Castle Peak Group reached a silent agreement with a syndicate composed of Futures Bank creditors, in which the syndicate agreed not to liquidate Qingshan's positions or to ask for an increase in margin for existing positions.

In this long-empty war, the silent agreement has become an important turning point from the follow-up trend of Lenny futures prices.

Why did Aoyama Holdings reach this agreement with the syndicate?

Zheshang Futures: Jiang Xinbin, senior analyst of non-ferrous metals, said: "based on the closing price of Lunni on March 7, 50, 000 US dollars / ton, the position loss of Castle Peak Group may exceed 5 billion US dollars. There is a further risk of subsequent losses. As the Castle Peak Group has gradually increased its overseas investment in recent years, its own cash flow is not very abundant. If the lending banks do not provide liquidity support, the Castle Peak Group may have to sell some of its high-quality assets to add margin, which will lead to a substantial discount of its high-quality assets. At the same time, the disk loss will seriously affect its actual business activities. At the same time, the loss of high-quality assets may lead to less cooperation between industrial partners and banks, which will have a greater impact on the future industry layout and follow-up operation of Castle Peak Group. As for the lending banks, once Castle Peak is unable to escape, the lending banks will first face the pressure of margin repayment, and at the same time, considering that the amount of Castle Peak loans is very large, a large number of loans will not be recovered, which will eventually have a serious impact on the bank balance sheet. "

Closing or delivery?

With the signing of the silent agreement, Castle Peak Group does not have the pressure to make a margin call for the time being. So, how will Castle Peak Group deal with huge empty orders in the future? Is the position closed or delivered?

Another time point of widespread concern is that all nickel contracts signed before March 16 will be delivered by March 23.

So, can Castle Peak raise enough nickel for delivery, whether it is cash delivery or physical delivery? Is it possible for high nickel matte to replace nickel plate and nickel bean?

What is worth paying attention to is that this round of emptying is realized by bulls using futures and spot linkage.

As of February 9, there was an unidentified nickel stockholder holding 50 per cent / 80 per cent of LME's nickel stocks, according to LME. At that time, it had been holding for nearly a month and held positions for a relatively long time, indicating that holders were very bullish on the rise in nickel prices, or inventory for their future supply contracts.

So will the long nickel futures holder, who holds 80 per cent of LME's 50 per cent nickel inventory, profit handsomely in this round of long-short wars or is it likely to face inventory pressure?

Jiang Xinbin said: "by tracing the inventory of LME in 2021, we can judge that the company is gradually earning spot warehouse receipts. At the same time, he gradually laid out his long position in LME, and through the 'warm water boiled frog' model, the company finally squeezed the short positions in the way of future linkage. "

Are there enough deliverables?

It is worth mentioning that Wang Cong said: "after March, basically did not enter the customs, but in the export." Because at present, the price of nickel is very cheap at home and very expensive abroad. There is a price gap at home and abroad. " Therefore, it believes that delivery in March, can be exchanged for high matte nickel plate, nickel beans basic quantity is very small, only the state reserve has some nickel. "the State Reserve has at least 60,000 tons of deliverables." Wang Cong thinks.

In fact, the high matte production capacity of Qingshan Group is increasing very fast. "Castle Peak produced almost 3000 tons of metal in February and increased its production capacity to about 8000-10, 000 tons in March, but the actual production will be slightly lower," Wang said. "

In view of this, analysts estimate production capacity at 8000-10, 000 tons.

It is worth mentioning that with the decline in the price of Lunni, invisible stocks can also be squeezed out. In Jiang Xinbin's view, when Lunni futures prices enter a falling market, we need to pay attention to the "invisible inventory" released by market participants.

"as the price of nickel has risen for more than a year, there are a lot of speculators or traders hoarding spot stocks to earn spot price dividends," it said. If the risk of LME squeeze recedes and nickel prices fall sharply, speculative demand in the market will weaken and some of the hoarded spot materials will gradually flow out. As the nickel plate has a high unit price and is easy to store, many traders regard it as a high-quality asset allocation, the superimposed nickel price has risen for a long time, and some sources of goods are not in circulation for a long time, which is also one of the hidden sources of inventory. Due to the concealment of speculative inventory and trader inventory, it is difficult to calculate the actual inventory, but considering the characteristics of the spot market in nickel market, the scale of such hidden inventory is not small. If the later hidden inventory flows into the spot market substantially, the situation of supply exceeding demand will be formed in the short term, which will seriously impact the spot price, which will eventually lead to the decline of spot Synchronize and the return of nickel price to a long-term reasonable range. "

Has the long-short game been reversed?

With the continuous decline in the price of Lunni, does the market pressure shift to the bullish side?

Guotai Junan Futures: senior researcher Shao Wanqiu said on March 18: "with the resumption of LME nickel trading, we believe that there will be a gradual return of internal and external prices, while the return is expected to be completed in the form of a gradual pullback in the outer disk and a slight strengthening in the inner disk, but the price return is expected to take a long time."

Shao Wanfu said: "from the price center of gravity, it is the global shortage of nickel resources, the high spot price of overseas nickel, and the supporting role of low inventory and low supply to the price of nickel." After the resumption of LME nickel trading, the volatility of nickel prices at home and abroad has been further magnified, and continued attention has been paid to the impact of LME warehouse receipt registration, LME nickel position concentration and the situation in Russia and Ukraine on nickel prices. "

Jiang Xinbin believes that as Castle Peak announced that it will replace part of the supply of nickel beans through high nickel matte, the market expects that Castle Peak will be able to participate in the follow-up delivery link, and the probability of bullish positions has dropped significantly, so the price of Lunni has fallen sharply. From the analysis of the current market operation, the follow-up Lunni price is expected to continue to fall.

"if the price of Lun nickel falls sharply, the pressure on bears will be alleviated significantly, and the margin pressure will no longer exist. Taking into account the uncertainty of late delivery, bears can also choose an opportunity to close their positions to ease their own financial pressure. But for bulls, the continuous limit affects market liquidity, some of the funds to catch up with the market will face additional margin pressure, but for early players, the sharp drop in nickel prices will only reduce its float, the overall profit is still very considerable. " Jiang Xinbin analyzed and said.

It is worth noting that the price of LME nickel rose as much as 15% on March 23, hitting the exchange limit.