The nickel magnate at the centre of a historic squeeze earlier this year has covered more of his short positions in recent weeks, cutting his total bets by more than half since the crisis swept through the metals world, bloomberg News said.
Qingshan holdings ltd. bought contracts in the market, reducing its short bets by about 10,000 lots, or 60,000 tons, mainly due to nickel prices falling in the past two weeks, according to people familiar with the matter. Other ways to offset that position are being explored, including sourcing third-party metals that meet specifications for delivery to LME warehouses, said the people, who asked not to be identified discussing private information.
The recent sharp reduction of short positions has helped ease the cash flow pressure on the world's largest nickel producer and eased pressure on its banks, which have agreed not to make margin calls on the position. It also begins to remove a key suspense from the LME and its nickel market, which has been Mired in a prolonged period of low volumes and liquidity since the crisis.
Aoyama didn't respond to requests for comment
Nickel, which is used to make stainless steel and rechargeable batteries, soared above $100,000 a tonne on March 8 before the LME halted trading and cancelled billions of dollars of deals at top prices. After reaching a standstill agreement with his bank, the market reopened and new daily price limits were in place, but even two months later trading volumes were still well below normal levels.
However, trading has accelerated in the past few weeks as prices have fallen amid a broad sell-off in metals triggered by concerns about the outlook for global demand. During the metals market downturn, additional buying provided support, with a range of activity seen as prices hit key levels, including $30,000 and $28,000.
Mr. Aoyama had earlier covered about 20% of his short positions after prices fell below $30,000 a ton, triggering a nickel trading frenzy in mid-March, Bloomberg reported at the time. Based on castle Peak's total position of more than 150,000 tonnes when the market closed on March 8, the latest covering indicates that the remaining short position is about 60,000 tonnes.
The company plans to produce 850,000 metric tons of nickel in 2022, a 40 percent year-on-year increase, Bloomberg previously reported.
To further offset that position, Aoyama has held talks with refined nickel suppliers to buy metal that can be shipped to LME warehouses, according to people familiar with the matter. Despite being the world's largest producer, the company produces different forms of nickel that do not meet the exchange's delivery specifications when short positions expire. Meanwhile, refined nickel supplies are tight -- stocks in LME warehouses currently stand at about 73,000 tonnes.
Aoyama hasn't delivered any goods, but talks with other suppliers are progressing, people familiar with the matter said.
