Desynchronization of nickel production and consumption
This piece feels ... confused. It starts off with casually assuming that pricing mechanisms &quot;just don&#x27;t work&quot; for a commodity, which sets a bad tone, but is forgivable if it can deliver. But then I got to this part[1]:<p>&gt;What caused the price spike? The largest nickel producer in the world, a Chinese company called Tsingshan, was short nickel because it had made a huge capital investment and was set to produce 40% more nickel in 2022 than it had in 2021. ... But what if prices go up? Isn&#x27;t a short dangerous? Not really if you&#x27;re short nickel and you&#x27;re a nickel producer. ... Your shorts are &quot;covered&quot; rather than &quot;naked,&quot; so your losses are limited.<p>Okay, so far so good: Tsingshan took a short position, which was safe, because it&#x27;s covered, by virtue of them being a producer of the underlying (nickel).<p>&gt;They&#x27;re limited, that is, so long as you can deliver nickel against the contracts. But what happens if ... closing your short is going to require you to deliver $10s of billions of nickel, and you&#x27;re going to have to come up with $1s of billions immediately because of margin calls. You don&#x27;t have that kind of cash on hand, and you can&#x27;t deliver a huge chunk of your production up immediately against those short contracts.<p>So ... the shorts <i>weren&#x27;t</i> actually covered, and you can <i>expect</i> to suffer huge losses if the price goes up. I still don&#x27;t see the case for voiding the transactions, since the price movement was responding to real macroeconomic phenomena, and the short-seller couldn&#x27;t actually cover.<p>[1] I&#x27;ve cut out large pieces of the quotes to get the point quickly, while doing my best to preserve the meaning