What’s new: The wild surge in nickel prices erased more than 20% of the market value of Zhejiang Huayou Cobalt Co. Ltd. in two days as concerns mounted over the company’s souring bets on the metal and links to Tsingshan Holding Group.
Shanghai-traded Huayou Cobalt plunged Wednesday by the daily 10% limit for a second day, wiping out 26 billion yuan ($4.1 billion) of market value over the two days, after nickel futures surged to a record high in London.
Huayou Cobalt runs a nickel project in Indonesia in partnership with Tsingshan, a leading nickel and stainless steel producer that lost heavily on short positions in nickel.
Huayou Cobalt’s production and operations including its Indonesia nickel projects remain normal, the company said Wednesday in a filing. The company said it has not been forced to close a position yet but faces the risk of losses on its hedging operations due to uncertainties in the nickel futures market.
The background: The price of nickel, used in stainless steel and electric-vehicle batteries, surged as much as 250% in two days to trade briefly above $100,000 a ton early Tuesday, prompting the London Metal Exchange to halt trading.
Tsingshan, which built up a short position since last year betting on a price decline for nickel, reportedly faces billions of dollars in mark-to-market losses. Several Chinese metal enterprises having business ties with Tsingshan tumbled due to concerns over their risk exposure.
Contact reporter Han Wei (weihan@caixin.com) and editor Bob Simison (bob.simison@caixin.com)
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