JPMorgan has made deep cuts to metals business after nickel crisis
JPMorgan Chase & Co. has cut dozens of base metals clients and slashed bankers’ bonuses, as the business remains under harsh internal scrutiny in the wake of last year’s nickel crisis.
JPMorgan, Wall Street’s biggest player in metals, has been reviewing its commodity exposure for over a year after it played a prominent role as the biggest counterparty of the Chinese company at the center of the nickel short squeeze on the London Metal Exchange. It was also a financier of the top Chinese copper trader whose business ground to a halt after a liquidity crisis last year.
While the review is ongoing, JPMorgan has already scaled back its base metals business substantially, according to people familiar with the matter, and the moves are being felt across the industry.
The bank has cut numerous base metals clients in Asia, with particularly deep cuts among privately owned Chinese companies, the people said. It is continuing to work only with a few large, long-standing clients in the region, they said. Bloomberg last year reported that JPMorgan had stopped new inventory financing in China.
JPMorgan’s base metals team is under heightened internal scrutiny and bonuses for many have been cut, the people added. In the wake of the crisis last March, the bank’s nickel position was overseen by top management, including COO Daniel Pinto, and its appetite for risk-taking in metals has been reined in.
JPMorgan declined to comment. A person close to the bank said that it continued to have a strong base metals business both globally and in Asia.
The retreat by the longstanding market leader comes as the metals world has been grappling with wild price swings, high interest rates, and a series of scandals that have sapped market liquidity. Some other mainstay banks have also pared back their exposure, particularly in Asia — Bloomberg reported last year that ICBC Standard Bank had also halted new inventory financing deals for copper in China.
Still, others have sought to capitalize as JPMorgan pulls back, with several American and European banks seeking to expand in metals in recent months.
CENTRAL ROLE
JPMorgan played a central role in the nickel crisis that brought the LME to its knees in March. It was the largest counterparty for Tsingshan Holding Group Co., the company whose huge short position was at the center of the squeeze. It reported a $120-million loss related to nickel in its first quarter results a year ago.
As the largest bank in the base metals industry, it was also involved in the saga in other ways. Court filings have shown that it was a broker for both Elliott Investment Management and Jane Street, which are suing the LME over the decision to cancel trades.
And when Maike Metals International Ltd. ran into trouble later last year, JPMorgan was left with around 30,000 tons of copper it had been financing for the trading company in Shanghai. In the end, the bank was able to sell the metal without major losses, the people said, but the episode highlighted the risks of trading in China’s base metals industry. Maike has since filed a request for a court-led restructuring.
More recently, the bank was revealed as the owner of $1.3-million of LME nickel contracts that were invalidated after they turned out to be backed by bags of stones.
JPMorgan began monitoring its commodities exposure amid heightened market volatility even before the nickel short squeeze last March, but since then has been conducting a deeper review.
While the bank’s cuts have been focused on base metals, it has also been reviewing its activities across commodities. Several gold refineries have had their credit lines with the lender cut since the nickel crisis, according to people familiar with the matter.
And there have been a number of recent departures from JPMorgan’s commodities team, although they aren’t connected to the review, one of the people said. They include Jack Luo, a London-based banker who played a key role in handling the company’s relationship with Tsingshan and Maike, as well as Amar Singh, the head of commodities sales for Asia Pacific, according to people familiar with the matter.
Comments
Press Office
Announcements
What's On
Subscribe to improve your user experience...
Option 1 (equivalent of R125 a month):
Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format
Option 2 (equivalent of R375 a month):
All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors
including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.
Already a subscriber?
Forgotten your password?
Receive weekly copy of Creamer Media's Engineering News & Mining Weekly magazine (print copy for those in South Africa and e-magazine for those outside of South Africa)
➕
Recieve daily email newsletters
➕
Access to full search results
➕
Access archive of magazine back copies
➕
Access to Projects in Progress
➕
Access to ONE Research Report of your choice in PDF format
RESEARCH CHANNEL AFRICA
R4500 (equivalent of R375 a month)
SUBSCRIBEAll benefits from Option 1
➕
Access to Creamer Media's Research Channel Africa for ALL Research Reports on various industrial and mining sectors, in PDF format, including on:
Electricity
➕
Water
➕
Energy Transition
➕
Hydrogen
➕
Roads, Rail and Ports
➕
Coal
➕
Gold
➕
Platinum
➕
Battery Metals
➕
etc.
Receive all benefits from Option 1 or Option 2 delivered to numerous people at your company
➕
Multiple User names and Passwords for simultaneous log-ins
➕
Intranet integration access to all in your organisation