(Yicai Global) March 10 -- China's Tsingshan Holding Group, which is estimated to have a short position of 200,000 tons of nickel, has said it has enough spot product for delivery, and the news could cause nickel prices to plummet, hitting the investors who drove up prices hard, Securities Daily reported yesterday, citing analysts.

Tsingshan will replace nickel plates with high-grade nickel and has gathered enough spot products for delivery, the world’s second-largest nickel producer said yesterday.

The news has already started to bring prices down. Nickel futures contracts in Shanghai due in August fell 17 percent to hit limit down in after-hours trading yesterday at CNY211,500 (USD33,462) a ton.

Tsingshan has been at the center of a commodities maelstrom in recent days during which both the London Metal Exchange and the Shanghai Futures Exchange halted trading of the metal on March 8 due to wild fluctuations in prices. Nickel futures prices on the London bourse jumped almost three-and-a-half times to USD101,365 a ton on March 8 from the day before. While Shanghai’s most-traded nickel futures contract soared to CNY228,810 (USD36,235) a ton that day.

Wenzhou-based Tsingshan stood to lose around USD12 billion should it close out its 200,000-ton short position based on calculations at extreme prices, according to the Securities Daily.

However, the London Metal Exchange’s swift action, which included postponing the delivery of all spot nickel contracts due yesterday and banning Russian nickel, will help Tsingshan cope with the current challenges and meet its nickel delivery obligations, Pacific Securities said.

Nickel prices are much higher than basic demand and are likely to drop dramatically if Tsingshan has enough spot products for delivery, a metal futures researcher said. This will lead to huge losses for those investors who pushed up the prices, he added.

The nickel traded on the London Metal Exchange must be cathode nickel with a nickel content of at least 99.8 percent, in line with specifications set by the American Society for Testing and Materials International.

Editor: Kim Taylor