The price of nickel on the London Metals Exchange (LME) has been in disarray, causing a huge bet on falling prices made by Chinese tycoon Xiang Guangda late last year to backfire spectacularly. Prices more than doubled to over $100,000 a tonne last week, forcing the 145-year old exchange to stop trading in nickel contracts — with Xiang’s company Tsingshan Holding Group facing an $8 billion paper loss.

Xiang, also known as ‘Big Shot,’ has a long history of upending the market for nickel, a key ingredient in stainless steel and electric vehicle batteries, though usually with more success. Privately-owned Tsingshan has grown into a global industry leader that’s now at the center of a sprawling, vertically-integrated business empire. In turn, that has made Xiang’s family one of the most powerful in Zhejiang, the eastern province known for churning out many Chinese entrepreneurs. 

This week, The Wire takes a closer look at the Tsingshan business empire and Xiang Guangda’s big bets. 

NICKEL FOR A DIME

Xiang was born in 1958 to an ordinary family in the city of Wenzhou, in Zhejiang Province, and later founded a window and door-making business that supplied state automakers. In the 1990s he pivoted to stainless steel, a corrosion resistant alloy that’s common in kitchenware and vehicles. 

Going into the 2000s, foreign companies such as Australia’s BHP Billiton, Brazil’s Vale SA and Russia’s Norilsk Nickel dominated nickel production. After prices shot up five-fold between 2005 and 2007, squeezing Tsingshan’s profits, the company responded by pioneering a way to make its stainless steel on the cheap, using refined nickel pig iron, a lower-grade substitute. 

Type	Nickel Purity
Nickel Pig Iron (Class II) Used for: stainless steel	2-13%
Nickel Matte	76%
Nickel (Class I) Used for: EV batteries	>99%
LME Nickel	99.80%

To secure its nickel pig iron, Xiang made a big bet that would later pay huge dividends: investing in Indonesia. The country is rich in ores that can be refined into nickel pig iron but was an unproven supplier. With perfect timing, Tsingshan invested in a vast smelting facility in Morowali on the island of Sulawesi in 2013, just one year before Indonesia banned the export of unprocessed minerals.

Tsingshan’s business took off: today it is the world’s largest producer of stainless steel. Other Chinese companies, including the mining giant Huayou Cobalt and CATL-affiliate Brunp Recycling Technology, have since followed into Indonesia, funneling in more than $8 billion worth of investments via the industrial parks Tsingshan built in Morowali. 

The company has faced a major challenge in recent years as growing EV battery production has increased demand for nickel: Last February, Tesla CEO Elon Musk called nickel his “biggest concern for scaling lithium-ion cell production.” The problem for Tsingshan was that its nickel pig iron is only about 11 percent pure, whereas EV batteries require nickel with more than 99 percent purity. 

Its announcement last March that it had developed a commercially viable way to refine nickel pig iron into nickel matte, an intermediate product that can be further processed into battery-grade chemicals, thus shocked the market. Nickel futures plunged to their lowest in five years. 

BIG SHOT’S BIG SHORT

Tsingshan announced late last year that it had begun producing nickel matte, with the goal of selling 100,000 tonnes to Huayou Cobalt and battery supplier CNGR within the first year of output. Also late last year, with nickel future prices having rebounded from their dip in March, Xiang began to build up a short position on the LME through Tsingshan. The size of Xiang’s position is not public but has been reported at about 150,000 tonnes.

The bet soured after Western nations placed sanctions on Russia following its invasion of Ukraine, a move that stoked fears about nickel supply given Russia’s status as a major producer. As prices drove upwards, Xiang seemed determined to maintain his short position. In response, Tsingshan’s creditors demanded the company put up more cash as collateral, a move known as a margin call. Another option for Tsingshan to settle its debts, via delivery of its own nickel, was complicated by the fact that Tsingshan’s nickel doesn’t meet the 99.8 percent purity standard required to trade on the LME. 

Finally on Monday, Tsingshan reached an agreement with banks under which they would not issue more margin calls or force the company to close out its short position. Tsingshan also reportedly reached agreements with two companies to swap its nickel products for LME-grade nickel to close out some of its shorts.

INDUSTRIAL EMPIRE

Tsingshan Holdings Group is privately owned, with Xiang Guangda holding a 48.5 percent stake in the company, and his brother Xiang Guangtong owning 14.1 percent. According to the company, in 2019, it had about 80,000 employees worldwide and revenue of $41 billion. The Hurun Report estimates Xiang Guangda’s wealth at about $4.1 billion based on his stake in Tsingshan. 

Xiang, though, holds a stake in close to 200 other businesses, both directly and indirectly, according to WireScreen. For example, the sprawling Indonesia Morowali Industrial Park is 49.69 percent owned by the Shanghai Decent Investment Group, in which Xiang holds a controlling 71.5 percent stake. 

Other companies in Xiang’s empire are largely concentrated in Shanghai, Zhejiang, and Fujian provinces, where Tsingshan’s production bases are located. Many of the companies are vertically integrated in the stainless steel supply chain. But Xiang also holds stakes in battery-making companies and unrelated industries including trade and real estate. An eclectic mix of other holdings includes a life insurance company, an ed-tech firm, a brewery, cinema business and a hotel.

These are some of the major investments in Xiang Guangda’s portfolio:

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