Nickel Tycoon Covered Part of Big Short Position This Week

(Bloomberg) -- The Chinese tycoon whose big short bet on nickel was the focus of an unprecedented short squeeze has covered some of his position, according to people familiar with the matter.

Xiang Guangda, the owner of nickel and stainless-steel giant Tsingshan Holding Group Co., bought contracts on the London Metal Exchange to reduce his short bet as the nickel market briefly unfroze this week, the people said, asking not to be identified as the information wasn’t public.

The move reduces the size of the potential pain for Xiang and his banks as nickel prices soar once again -- prices on the LME are up more than 30% over the past two days. However, the businessman and his allies have only reduced a portion of their total short position, and still hold large bets on falling prices, the people said.

The short squeeze has caused mayhem across the metals industry and threatened the future of the LME itself. The nickel price spiked 250% in two days earlier this month as Tsingshan struggled to meet margin calls on its large short position.

The LME responded by suspending trading and canceling billions of dollars of transactions. The market reopened last week after Tsingshan announced a deal with its banks to avoid further margin calls.

Tsingshan and its peers have covered tens of thousands of tons of their short positions, one of the people said. Xiang had short holdings of over 150,000 tons when the market was halted on March 8, and his business and trading partners held additional large short positions on top of that.

Tsingshan didn’t respond to multiple requests for comment.

Xiang previously told his banks that he didn’t want reduce his short position, Bloomberg reported March 10.

However, the nickel price has dropped sharply since then, falling as low as $26,675 a ton this week, compared with a closing price of $48,078 a ton on March 7 -- the last day of trading that the LME allowed to stand when it closed the market.

Since Tuesday, the market has rebounded sharply. Futures surged by the exchange’s daily limit of 15% on both Wednesday and Thursday, while nickel prices in Shanghai have also jumped. 

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