JPMorgan Chase caught as counterparty in short-term nickel drama – Bloomberg (NYSE:JPM)

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JPMorgan Chase (NYSE: JPM) seems to be caught in the middle of a short squeeze as the larger nickel counterpart trades by Chinese tycoon Xiang Guangda, Bloomberg reportsciting people familiar with the matter.

About 50,000 tonnes of Xiang’s total nickel short position of more than 150,000 tonnes is held through an over-the-counter position with JPMorgan (JPM), Bloomberg said. Based on that position, Xiang’s company, Tsingshan Holding Group, would have owed the New York-based bank about $1 billion in margin on Monday. Earlier this week, the news agency reported that Tsingshan was struggling to pay margin calls to its brokers and banks.

JPMorgan (JPM) is currently leading negotiations between Xiang and about 10 banks and brokers through which his nickel short position is held, the people told Bloomberg. With nickel prices rising, banks and brokers involved in trades now have to make large margin calls themselves on the LME to cover short positions.

Other banks and brokers involved include: Standard Chartered Bank Plc (OTCPK: SCBFF)BNP Paribas SA (OTCQX: BNPQF)CCB International Holdings, ICBC Standard Bank Plc, United Overseas Bank Ltd. (OTCPK: UOVEF)BOC International Holdings Ltd., DBS Group Holdings Ltd. (OTCPK: DBSDF)and Sucden Financial brokerage.

The crisis could end without losses for the banks and for Xiang. Tsingshan Holding, one of the world’s largest nickel producers, could benefit from higher prices if it manages to weather this period. Additionally, if Xiang keeps his short position and nickel prices fall after the LME reopens, the amount he owes banks and brokers could drop drastically.

The London Metal Exchange rushes to contain the fallout from the nickel trade crisis on Thursday