(Yicai Global) March 15 -- Tsingshan Holding Group, the world’s second-largest nickel producer, has reached a standstill agreement with banks that they will not close out or make further margin calls on its existing positions on the London Metal Exchange.

Tsingshan will reduce the existing positions in a reasonable and orderly manner as soon as market conditions return to normal, Shanghai Tsingshan Trading, an affiliate of the company, said in a statement posted on WeChat yesterday. It did not mention the length of the standstill period.

Top executives from Wenzhou-based Tsingshan will leave for Beijing soon to meet with parties and hammer out a solution as soon as possible, China Securities Journal reported yesterday, citing a person with knowledge of the matter.

The company has been at the center of a commodities maelstrom during which both the LME and the Shanghai Futures Exchange halted nickel trading on March 8 because of wild price swings. Nickel futures soared almost three-and-a-half times to USD101,365 a ton in London on March 8, while Shanghai’s most-traded nickel contract soared to CNY228,810 (USD35,882) a ton the same day.

Tsingshan has been struggling to pay margin calls to its banks and brokers and it is at risk of losing as much as USD12 billion should it close out its 200,000-ton short positions, according to calculations based on extreme pricing, Securities Daily reported on March 9.

Securities Daily also said Tsingshan had deployed enough spot products for delivery by replacing nickel plates with its own nickel matte, though industry insiders found it “hard to believe.”

The LME will resume nickel trading at 8 a.m. local time tomorrow, it said in a statement yesterday.

Editor: Futura Costaglione