Write an essayon the case of LME Nickel futures price spike. Below is a
drafted logic chain. You can choose to follow it, but you are very welcome to create your own
by rearranging the order and/or enriching it.
What happened on March 7th and 8th in LME Nickel market?
What do you think are the reasons for LME Nickel futures price spike? Do you think
it is purely caused by unbalanced demand and supply?
What causes the unbalanced demand and supply?
What are the top nickel producers in the world?
Are there any big events impacting nickel production or transportation?
What is BDI? Why is it relevant?
What is nickel needed for? Is more nickel needed?
Do you think there is any price manipulation? How to judge whether there
exists price manipulation or not? What are the prices of other non-ferrous
metals on March 7th and 8th?
Who are left exposed to big trading losses with the price spike, futures buyers,
Who are left exposed to big trading profit with the price spike, futures buyers,
What is a short squeeze and what is a long squeeze?
Do you think the LME nickel price spike is a short squeeze or a long squeeze?
Tsingshan Holding Group Co was the dominant seller of nickel futures in recent
months. What business does Tsingshan do? Does it do upstream or downstream
Nickel business, or both?
Why did Tsingshan take a short position?
Do you think Tsingshan ex-ante takes the correct position in direction, long or short?
Do you think Tsingshan’s hedging position is appropriate, insufficient, or excessive?
What is the size of Tsingshan’s hedging position?
What is the production of nickel worldwide from 2010 to 2021?
What does it mean “opening stock”?
How big is the LME nickel opening stock?
What will happen if you take two Panadol when you are unwell? What will
happen if you take 20 Panadol? What will happen if a hedge position is
7. What will happen if you take a large position without splitting the order into small
orders, and submit one large order under one name? Will you be easily targeted in the
commodity futures market?
Search for LME Nickel futures contract specification. What is the standard of
the underlying? In practice, what nickel product does LME accept for physical
Is Tsingshan’s product certified for futures delivery? If not, is this hedge a
perfect hedge? Any underlying mismatch? How does it affect the margin
requirement? How does it affect hedging position?
What are the choices usually for futures sellers at maturity?
If Tsingshan was market-cornered because of lacking spots for delivery, then
what are the choices left?
What does it mean cash settlement and physical delivery, generally, are they
the same for futures sellers? Are they the same for futures buyers?
Alternatively, on what conditions, are they the same? On what conditions, do
they result differently?
Regarding Tsingshan, what are the differences between finding 200,000 tons
of Nickel for delivery and closeout its position?
What are the differences between Tsingshan’s finding 200,000 tons of Nickel
for delivery and closeout its position, to the “hidden sniper”? (I call the counterparty “sniper” in the question. You don’t have to use this word in the
essay, but you can use it if you want)
What are the actions taken by LME? How does it affect Tsingshan and the “Sniper”?
What are the lessons to learn for Tsingshan, for “Snipers”, for institutional investors,
for retail investors, and for regulators (e.g., LME)?