How Can Hedgers Thrive in the Futures Market? A Case Study of Tsingshan’s Nickel Short Squeeze
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How Can Hedgers Thrive in the Futures Market? A Case Study of Tsingshan’s Nickel Short Squeeze

Yunyi Qian 1* Haoyan Li 2
1 University of California, Santa Barbara
2 Southwestern University of Finance and Economics
*Corresponding author: yqian17@ucsb.edu
Published on 11 July 2025
Volume Cover
AEMPS Vol.202
ISSN (Print): 2754-1177
ISSN (Online): 2754-1169
ISBN (Print): 978-1-80590-263-8
ISBN (Online): 978-1-80590-264-5
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Abstract

This paper aims to explore what hedgers can do in the futures market to gain profits through a case study of Tsingshan Company's LME short nickel sale in 2022. The primary findings encompass an examination of the risks and hurdles related to Tsingshan's OTC trading, the purity divergence of nickel in the exchange market, and an assessment of Tsingshan's margin requirements during the short squeeze. Additionally, the paper scrutinizes the functions of the London Metal Exchange and the Chinese government within this context. The conclusions underscore the significance of risk management and suitable hedging tactics, cautioning against speculative ventures devoid of meticulous risk assessment that can result in significant financial setbacks. Employing indirect and rolling hedge strategies in tandem and with precision may aid firms in evading or mitigating losses. The absence of price limit regulations by the LME clearinghouse amplified market volatility and liquidity risks, with Tsingshan's survival predominantly attributed to the Chinese government's intervention, albeit such interventions are infrequent. Future investigations may concentrate on refining effective hedging approaches and enhancing market regulations.

Keywords:

Tsingshan, short selling, speculation, hedge, futures market

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Qian,Y.;Li,H. (2025). How Can Hedgers Thrive in the Futures Market? A Case Study of Tsingshan’s Nickel Short Squeeze. Advances in Economics, Management and Political Sciences,202,23-36.

References

[1]. Zhou Yuming. (2023). The "Nickel Squeeze" Incident on the London Metal Exchange: Enlightenment for Futures Risk Management of Bulk Commodity Enterprises in China. Modern marketing: Volume one (3), 52-54.

[2]. Jones, Alexander. (2022). “The Nickel Short Squeeze: What Happened?” International Banker, 26 Apr.

[3]. Chen, James. (2022). “How the Futures Market Works.” Investopedia.

[4]. Office for Budget Responsibility. (2022). “How Does the Russian Invasion of Ukraine Affect the UK Economy?”. Office for Budget Responsibility.

[5]. Chen, James. (2023). “Speculation: Trading with High Risks, High Potential Rewards.” Investopedia.

[6]. Reiff, Nathan. (2021). “Hedge Definition: What It Is and How It Works in Investing.” Investopedia.

[7]. Robert Dukich. (2022). Liquidity Management in Central Clearing: How the Default Waterfall Can Be Improved, NYU Stern School of Business.

[8]. Shanghai Futures Exchange. (2023). Shanghai Futures Exchange Nonferrous Metals Futures Price Index Compilation Program. Shanghai Futures Exchange.

[9]. Minerals Make Life. (2015). “The Importance of Nickel in Everyday Life - Minerals Make Life.” Minerals Make Life.

[10]. Shilov, Anton. (2024). “Major Chinese Semiconductor Company Goes Bankrupt — 23 Others Recently Withdrew IPO Applications.” Tom’s Hardware.

References

[1]. Zhou Yuming. (2023). The "Nickel Squeeze" Incident on the London Metal Exchange: Enlightenment for Futures Risk Management of Bulk Commodity Enterprises in China. Modern marketing: Volume one (3), 52-54.

[2]. Jones, Alexander. (2022). “The Nickel Short Squeeze: What Happened?” International Banker, 26 Apr.

[3]. Chen, James. (2022). “How the Futures Market Works.” Investopedia.

[4]. Office for Budget Responsibility. (2022). “How Does the Russian Invasion of Ukraine Affect the UK Economy?”. Office for Budget Responsibility.

[5]. Chen, James. (2023). “Speculation: Trading with High Risks, High Potential Rewards.” Investopedia.

[6]. Reiff, Nathan. (2021). “Hedge Definition: What It Is and How It Works in Investing.” Investopedia.

[7]. Robert Dukich. (2022). Liquidity Management in Central Clearing: How the Default Waterfall Can Be Improved, NYU Stern School of Business.

[8]. Shanghai Futures Exchange. (2023). Shanghai Futures Exchange Nonferrous Metals Futures Price Index Compilation Program. Shanghai Futures Exchange.

[9]. Minerals Make Life. (2015). “The Importance of Nickel in Everyday Life - Minerals Make Life.” Minerals Make Life.

[10]. Shilov, Anton. (2024). “Major Chinese Semiconductor Company Goes Bankrupt — 23 Others Recently Withdrew IPO Applications.” Tom’s Hardware.

Cite this article

Qian,Y.;Li,H. (2025). How Can Hedgers Thrive in the Futures Market? A Case Study of Tsingshan’s Nickel Short Squeeze. Advances in Economics, Management and Political Sciences,202,23-36.

Data availability

The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.

About volume

Volume title: Proceedings of the 3rd International Conference on Financial Technology and Business Analysis

ISBN: 978-1-80590-263-8(Print) / 978-1-80590-264-5(Online)
Editor: Ursula Faura-Martínez
Conference website: https://2024.icftba.org/
Conference date: 13 June 2025
Series: Advances in Economics, Management and Political Sciences
Volume number: Vol.202
ISSN: 2754-1169(Print) / 2754-1177(Online)

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