March 17, 2022

Happy St. Patrick's Day! If you're not already on your second McDonald's Shamrock Shake, time to catch up. Today is also the birthday of Irish singer Hozier, auto-tune's worst enemy. Celebrate by watching this 2019 video of him performing "Take me to Church" in the Subway (recorded by Roca friend, Subway Creatures).

Now that you have chills, learn about last week's chaos in the nickel market in Today's Wrap. One man made a billion dollar bet that.... didn't end very well.

― Key Stories

Zelensky Addresses US
Overview

• Ukrainian President Volodymr Zelensky delivered a virtual address to Congress
• “Ukraine is grateful to the US for its overwhelming support,” he said. “I call on you to do more.” He likened the war to 9/11 and Pearl Harbor, and asked the US to free its block on the transfer of fighter jets
• Last week, the US rejected an offer by Poland to provide Ukraine with Polish fighter jets. Poland wanted the US to transfer the jets to Ukraine
• News broke that Ukraine and Russia are progressing to a deal to end the war in exchange for Ukraine remaining neutral between Russia and the US

Instagram Launches Parental Controls

• Instagram is launching parental controls that let parents monitor their kids’ behavior on the app
• The first of 3 features launched in the US on Wednesday. They let parents track and limit the time their kids spend on IG, see their kids’ followers and followings, and be alerted when their children report someone
• Future controls will let parents set the hours their kids can use Instagram
• Meta also announced tools for Oculus, its VR headset, that let parents block their children from seeing explicit material. Meta has been criticized for the effects its assets have on kids' mental health

China Locks Down Again

• Chinese cities are locking down as the country faces its biggest reported outbreak of the pandemic
• The 17.5M-person city of Shenzhen has locked down, as have other parts of the country. Factories in Shenzhen, including ones that supply Apple, have closed, raising supply chain concerns
• In total, 51M+ people are under stay-at-home orders. China’s reported case numbers are at their highest since the original Wuhan outbreak
• China has been pursuing a “zero-Covid strategy,” in which the government reacts to outbreaks with mass testing and stringent lockdowns

Denmark Cig Ban + Drinking Age Hike
Overview

• Denmark's government proposed blocking those born in or after 2010 from buying nicotine products. It also proposed raising the drinking age from 16 to 18
• Denmark would be the first European country to enact a future nicotine ban; New Zealand recently enacted a similar policy
• If approved, the proposal would block those  currently <13-yo from ever buying nicotine products; about 30% of 15- to 29-yo Danes smoke
• The proposal's future is uncertain. The leading opposition party said that, “Once you come of age...you must be allowed to live the life you want”

See yesterday's results below the Wrap!

 Popcorn

Culture & Sports 

• Revenge of the Chris: Former CNN anchor Chris Cuomo is demanding $125M from his former network, alleging they ran a "smear campaign"
• Russell Wilson came out of the gate HOT in his first Denver Broncos press conference, saying that he wants to win "3, 4 Super Bowls"
• Cassie gets superpowers? Euphoria star Sydney Sweeney is joining Dakota Johnson in Sony’s Marvel movie Madame Web

• Day we've been dreading: Netflix is piloting a fee system for subscribers to share their passwords outside of their own households
• Take a hike, interest rates: The Federal Reserve is bumping interest rates for the first time in more than 3 years. It sees 6 more hikes this year
• Chick-fil-A may be considered a "public nuisance" by Santa Barbara in California. Its drive-thru lines have been causing traffic problems

• Popular language learning app Duolingo reports a 485% increase in the number of users studying Ukrainian. Poland has seen a 1800% surge
• Skadoosh! Everyone's favorite panda Jack Black will return as Po in Netflix's new series Kung Fu Panda: The Dragon Knight
• Saharan dust has turned the English skies orange! The dust cloud is sweeping across southern parts of the country
• The $10B James Webb Space Telescope is getting great reviews thus far, with one NASA official suggesting it's beating expectations

― Roca Wrap

A Newsletter Exclusive

Imagine making a bet so big and so wrong that it threatened to destroy an entire industry. That’s what happened in the nickel market last week, culminating in an unprecedented freeze of one of the world’s biggest nickel exchanges. 

Nickel is a silvery-white metal that has traditionally been used for steel. Increasingly, it goes into electronics and electric vehicle batteries as well. Russia is the world’s 3rd-largest nickel-producing company, and a Russian company is one of the world’s top nickel-producing companies. Many of the biggest nickel traders – which include both speculators and those looking to actually buy the commodity – make their trades at the London Metal Exchange (LME).

Like other commodities, the price of nickel began to rise about a year ago, when the pandemic started to recede. Between last March and this January, its price rose about 50%. 

Xiang Guangda was among those keeping an eye on the price. Xiang is the Chinese billionaire CEO of one of the world’s largest steel and nickel companies. Over the last year, as he saw the price continuing to rise, he increasingly bet it would fall. Some of his strategy was likely to hedge risk against the rising prices – commodity buyers often bet against the assets they are buying to protect themselves – but some of it was simple speculation. Either way, Xiang bet billions that the nickel price would fall. 

Nickel normally trades between $10,000 and $20,000 a ton, and doesn’t move more than a few hundred dollars a day. The price surged following Russia’s invasion of Ukraine on February 23, though, and continued to increase in the days after. By March 4, the price had jumped from $25,000 to $30,000 – months worth of movement in a week. 

Then on March 7, after the weekend, things went crazy: The price jumped 66%, to $48,078. Then the next day, March 8, it surged another $30,000. Then another. Around 6 AM, it was over $100,000 – more than double the prior record price. In total, nickel’s price spiked about 250% in roughly 24 hours. Investors and companies lost billions; nickel buyers realized they wouldn’t be able to buy what they needed. A crisis was brewing. 

As the price kept rising, the banks financing Xiang’s big bet feared his company wouldn’t be able to meet its obligations and called on it to put up $3B in cash. Other companies were in similar, albeit smaller, boats. Meanwhile, the banks themselves had bet against nickel and needed to put up their own money to cover their losses.

According to the LME, the price spike “created a systemic risk to the market.” Nickel-buying companies were set to go out of business and traders were facing huge losses. The panic was spreading to other metals, and the global metal market was threatening to collapse. 

Amid the panic, the LME froze all trading – then took the almost unprecedented step of erasing all $3.9B in trades that took place Tuesday morning. The price reset to where it was on March 7 ($48,078), and the market wasn’t allowed to reopen until yesterday, after Xiang’s company said it worked out a deal with its financiers. 

Amid spiking oil prices and the situation in Ukraine, the nickel crisis largely went under the radar. Yet that doesn’t mean its impact will be limited: “For the LME to cancel nickel trades between willing buyers and sellers is unforgiveable. UNFORGIVEABLE,” tweeted one commodity trader. People have predicted the canceling of the trades will destroy faith in and the LME itself. 

For now, though, nickel is back on the LME, and business is getting back to usual. 

 Games

1. KSERSINC
2. EHERT EKEUTRSMES
3. YLIMK AYW
4. ER'HYSHSE

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