Tsingshan, the Chinese nickel company at the center of a historic short squeeze of Nickel Price, has been behind some of the metal’s biggest swings in recent years, helping drive prices sharply higher in 2019 by stockpiling and triggering a brief drop early last year after unveiling a process to turn nickel pig iron into matte (typically around 70% nickel), a form suitable for the EV supply chain. The Wenzhou-based firm is targeting a nickel matte production capacity of 100,000 tonnes per year by October 2022.

In fact, the company did not short the Nickel for speculative gains. Tsingshan, among other Chinese companies, is ramping up a wave of new battery-grade nickel capacity in Indonesia. The company began building the short position because it wanted to hedge rising output.

On the other hand, Peabody, the biggest U.S. coal miner who has been mining coal since it was founded in 1883 got slammed with a $534 million margin call. The company had been locking in a price to sell coal at $84 a metric ton, a relatively high price over the decades found itself hedging at the wrong price. The Australian Newcastle coal futures price is up more than 400% in the past 12 months, hitting $425 on the same day Peabody got margin called.

These two companies' margin calls are one of the flashiest examples of how the volatility sweeping commodity markets will slam companies that are holding wrong-way bets. But when we start to see this news in the market, it is usually the peak of commodities prices.

The metal inventory level of LME, a data tracked by us actually gives us a direction on how the prices of metals will react. If there is another metal to be short squeezed again, we guess it could be Zinc. Also, the inventory level of Tin is building up, investors who are chasing high on Tin Futures or Malaysia Smelting Corp should be aware of this figure.

Source:iSquare Intelligence