Comment:
1. Action by relevant departments and LME is the key to solving the problem
According to an empty order of 200,000 tons of electrolytic nickel of 20,000 US dollars/ton from an enterprise in Zhejiang, according to LME nickel today's high of 100,000 US dollars/ton, this means a maximum loss of 16 billion US dollars. If LME does not give CCB International (a subsidiary of China Construction Bank) more time to make up for the failure to add a security deposit to the exchange because a certain metal industry customer failed to pay the security deposit to it, it means that all CCB's default positions can be cleared and directly generate a loss of up to 16 billion US dollars. After CCB's loss, it is impossible for an enterprise in Zhejiang to come up with that much money. Even if CCB advances funds to make up the security deposit, the nickel pressure will not end. The continued sharp rise in nickel prices means that the risk exposure left to CCB is limitless. The so-called unlimited backward movement of positions by an enterprise in Zhejiang or the unwillingness to give up losses is all taken by CCB's money. CCB is unlikely to agree. On March 8, the Chairman of China Construction Bank met with the chairman of Minmetals Group to reach a consensus on future in-depth strategic cooperation. Minmetals is a state-owned enterprise that began trading in non-ferrous metals, which indicates that CCB has begun to seek support from professional companies and help itself. Minmetals can coordinate supplies to help them deliver. Glencore waiting for many to agree is also a necessary condition for resolving the issue. The Hong Kong Stock Exchange is the majority shareholder of LME and is helpful in solving the problem, but LME's actions are more aimed at mitigating market risks. They do not intervene or directly secure a settlement. The bulls have surged, but the bears have gone bankrupt and are unable to pay. The checks they get are also empty checks.
2. An enterprise in Zhejiang saved its life by losing 6 billion US dollars
According to Lme Nickel's closing price of 50,000 US dollars/ton on March 7, the security deposit amount is 6 billion US dollars. It is likely that CCB will still pay in advance, and then an enterprise in Zhejiang will raise funds to pay back to CCB. An enterprise in Zhejiang can repay this debt with an annual profit of around 20 billion yuan. If no agreement is made to close the position, it will push CCB and itself into bankruptcy. An enterprise in Zhejiang holds an empty order of 200,000 tons of electrolytic nickel, but it only produces nickel and iron. It also buys Russian nickel and other goods for delivery. However, the Russian-Ukrainian conflict caused the inability to obtain goods and eventually forced stocks. We believe that the speculative component of Aoyama's operation was greater than value preservation. The company has always been speculating on a large scale, and once overtook Glencore and achieved success. Failure to learn the lessons will eventually cost more.
3. Overseas traders such as Glencore successfully made a profit
Most of the losses of a company in Zhejiang are the profits of overseas traders such as Glencore and Tokk. Although Glencore could make more money, it could also be an empty check. It is unknown whether an enterprise in Zhejiang will transfer shares to Gleng.
4. Nickel prices will return to normal and fall
In the short term, after closing positions, nickel prices will return to normal. Currently, inventory is the lowest in history, and it is difficult for nickel prices to fall. In the medium to long term, nickel supply is expected to increase by 350,000 tons to 2.67 million tons in '22, a growth rate of up to 15%. Stainless steel accounts for 80% of nickel demand, and the annual growth rate is around 7%. Electric vehicles account for 10% of nickel demand. According to the usage of a three-yuan lithium battery electric vehicle of 50 kilograms, 1.5 million additional vehicles are driving an increase in demand of 75,000 tons. Nickel prices are expected to fall steadily. However, futures delivery products are electrolytic nickel, and emptying without producing electrolytic nickel is more speculative.
Investment advice
Resources are priceless, and lithium ore is a core strategic asset. Lithium companies are purchasing normally, and the steady upward trend in lithium prices has not changed. The lithium sector was mistakenly killed because the market was worried that the sharp rise in nickel would impact the ternary cathode, which in turn would affect lithium demand. At the same time, the lithium sector is under pullback pressure as a strong sector. Continue to push for flexible combinations: Jiangte, Rongjie and China Mining; robust combinations: Zangge, Tianqi and Yongxing.