In response to the current demon nickel incident, let’s first take a look at the origin of Tsingshan Holdings. Tsingshan Holdings is the largest enterprise in Wenzhou and the largest private steel enterprise in China. It is the first giant in Wenzhou to enter the world's top 500. In 2021, it generated nearly 300 billion in revenue. Among the world's top 500 companies, it ranks around 200. What is the concept? It almost makes 800 million every morning. Relying on its technological advantages, sophisticated operations, and external support from infrastructure and finance under the “One Belt and One Road” initiative, Tsingshan Holdings once became the stainless steel company that successfully went overseas to Indonesia, and got rid of the passive state of smelting companies in response to changes in international nickel prices. After the rise of new energy vehicles, the control of nickel resources has become an important guarantee for the development of the power battery industry chain.

Why hold short contracts?

Normally speaking, the market pursues buying low and selling high. In order to attack domestic companies, foreign capital raises prices to attract holders to sell their stocks and buy all these stocks. If Tsingshan Holdings cannot provide adequate response The spot market can only go bankrupt and be successfully squeezed out by foreign capital. At present, it seems that Tsingshan can provide enough spot goods, and foreign capital can only buy high and sell low, otherwise it will only make more and more losses by holding a bunch of things that it cannot use much.

Qingshan produced nickel himself, and then bought 200,000 short nickel. At this time, his idea was to hedge risks. Either he would produce it and increase the price to make money, or he would buy short nickel. If the price falls, you will make money. There is always a profit on both sides. This method is called hedging and is a very normal and common financial operation. As a nickel producer, nickel price fluctuations will directly affect whether the company makes profits or losses. Therefore, in order to prevent uncertain risks caused by price fluctuations, companies will choose to short nickel in the financial market. In this way, if the price of nickel falls, although the spot market will not make money, the futures market can hedge this loss. Similarly, if prices rise, companies can also make profits in the spot market and can choose physical delivery to close short orders in the futures market.