The ASX finished lower today.
The S&P/ASX200 dropped 52.00 points or 0.73% to 7,097.40 and crossed below its 20-day moving average. Over the last five days, the index has gained 1.68% but is down 4.66% for the last year to date.
Bottom-performing stocks in this index were Chalice Mining Ltd (ASX:CHN, OTCQB:CGMLF) down 10.29% and Champion Iron Ltd (ASX:CIA) down 9.36%.
Nickel short shuts down LME
Battery metals have been steadily climbing over the last few years, with nickel being one of the key critical metals on many government lists due to its importance in the emerging electric vehicle and rechargeable battery markets.
Supply constraints sent the metal sky-rocketing over the last two weeks, caused predominantly by Russia’s invasion of Ukraine and its threats to cut off commodity exports to the west.
The price of nickel surged by 90% last Monday and briefly hit above US$55,000 (A$75,819), climbing even higher to above US$100,000 on Tuesday and then sliding back to US$80,000 until the London Metal Exchange (LME) intervened and hit the breaks on trading.
The finger has been pointed at the world's biggest nickel and stainless steel producer, Chinese company Tsingshan Holding Group, which is controlled by billionaire Xiang Guangda.
"He has in the past made big bets on the markets, and this is one in which he's made a very large bet and it's come unstuck," BetaShares chief economist David Bassanese said in an interview with the ABC.
Tsingshan Holding Group held the biggest short position for nickel on the London Metals Exchange, and sold nickel forward on the markets, betting on the price going down rather than up.
As the market continued to surge, Tsingshan and others had to buy back their contracts or put actual nickel against it. The company now reportedly faces up to $US8 billion in losses.
Analysts believe the size of Tsingshan's short position meant there was a major risk of contagion.
"You're almost looking at a Lehman-[Brothers]-type event because of the size of the position that he had and the potential repercussions if he had to try to liquidate that all in a single day," Bassanese said.
"You're too big to fail almost sometimes. And I think this is what we're seeing at the moment — the market closed down rather than let him fail and cause the market to implode."
The LME is set to restart trading at 8am London time on March 16 and has outlined some new curbs on trading to prevent more wild swings in the future, including daily price limits across metals.
Tsingshan has received the support of its banks but has not exited its short position of more than 150,000 tonnes of nickel. The company said it would reduce its short position in a “fair and orderly manner as abnormal market conditions subside,” according to the statement.
Deltacron emerges, fourth vaccine may be required
The coronavirus saga continues.
While Australia has returned to something approaching normal, China has locked down a province of 24 million people as infection numbers in the country climb once more, jumping to 1,437 cases and increasing fourfold in just a week.
Such extreme action has not been taken in China since the outbreak first began in 2020 and the province of Wuhan and its surrounds were completely locked down.
The measures may seem extreme, considering New South Wales alone reported more than 10,000 COVID-19 infections today, but China is one of the few countries still pursuing zero-covid.
Hong Kong similarly took the dubious crown of highest death rate from coronavirus in the developed world after two years of being almost COVID-free, reporting more than 32,400 cases on Sunday.
“People should not get the wrong impression that the virus situation is now under control,” said Dr Albert Au, an expert with the Hong Kong government’s Centre for Health Protection. “Once we let our guard down, it’s possible that [infections] will bounce back and rise again.”
The head of Pfizer Inc (NYSE:PFE) has echoed that sentiment, stating he believed a fourth dose of COVID-19 vaccination would be necessary before too long.
“It is necessary, a fourth booster right now,” Pfizer CEO Albert Bourla said in an interview with CBS (NYSE:CBS). “The protection that you are getting from the third, it is good enough, actually quite good for hospitalisations and deaths.
“It’s not that good against infections, but doesn’t last very long,” he added. “But we are just submitting those data to the FDA and then we will see what the experts also will say outside Pfizer.”
The emergence of a new subvariant, dubbed deltacron, has certainly not assuaged fears that another wave is on its way.
Sweden, Norway, Denmark and the United Kingdom have already seen major outbreaks of the new variant, but sufficient data has not been collected to determine whether the strain is more severe or more infectious.
With cooler, damper conditions approaching, Australians will have to remain vigilant in the face of potential new waves of coronavirus, flu included.