tsingshan nickel margin call

Still, contracts on the LME are backed by physical metal in a network of warehouses around the world, providing a direct link with the real-world metals industry. The company paid at least some of its margin calls early on Monday, according to a person familiar with the matter. Tsingshan and others had to buy . Now, the traders watched with a mixture of horror and grim fascination as the price went vertical. ", Britain's Financial Conduct Authority (FCA) and the Bank of England are talking to the London Metal Exchange about the resumption of a fair and orderly market in nickel, the FCA said on Monday in response to a request for comment. But this week the rally became a melt-up, with prices surging as much as 250 per cent in little more than 24 hours, to an all-time high of $US101,365 a tonne. A Glencore spokesman declined to comment. Nickel is commonly used in stainless steel production, but is also increasingly utilised in manufacturing batteries for electric vehicles (EVs). Matthew Chamberlain, the LMEs chief executive officer, had stayed up to watch. Its participants are a mix of the industrial metals companies, which tap the market to offset their price risks, and hedge funds, which use it to speculate. Xiang didnt believe the rally would last. Reuters could not determine how large Tsingshan's short position currently is after it cut its exposure. Capital Com Online Investments Ltd is a Company registered in the Commonwealth of The Bahamas and authorised by the Securities Commission of The Bahamas with license number SIA-F245. HONG KONGChinese nickel titan Tsingshan Holding Group faces billions of dollars in trading losses, people familiar with the company said, after .css-1h1us5y-StyledLink{color:var(--interactive-text-color);-webkit-text-decoration:underline;text-decoration:underline;}.css-1h1us5y-StyledLink:hover{-webkit-text-decoration:none;text-decoration:none;}Russias war in Ukraine set off an unprecedented rise in the price of a key metal used in stainless steel and electric-vehicle batteries. Nickel prices shot up as much as 250% in two days on the LME at the start of this week. It had sold nickel forward on the markets, betting on the price going down, not up. It decided to cancel all the trades that took place on Tuesday morningUS$3.9 billion of them, according to a Bloomberg calculation. The London Metal Exchange plans to resume trading in nickel, a week after it was suspended when the price of the metal surged to over $100,000 a ton. Our Standards: The Thomson Reuters Trust Principles. But since last year, Tsingshan has also started to produce a source of nickel for batteries. Why bet against nickel when you have a nickel business? Just over a year after the historic short squeeze involving video-game retailer GameStop sent shockwaves around the financial world, a similar episode broke out in early March, this time on the London Metal Exchanges (LME) nickel market. Plus, 60% off clearance with American Eagle promo code, Wayfair promo code: 10% off any single purchase, Kohl's promo code: 30% off for Kohl's Rewards Members, 50% off + free delivery on any order with DoorDash promo code. On this day, however, metal traders across the city were glued to a screen, watching the price action on the electronic market, which was already open to accommodate Asian trading. The creditors involved include both local and intentional banks, including J.P. Morgan and China Construction Bank . The LME has been asleep at the wheel, according to Andrew Mitchell, director of nickel research at consulting firm Wood Mackenzie, who spoke to the Wall Street Journal. Pleased to report an extremely strong year for the Nickel Industries and the. LONDON, March 8 (Reuters) - China's Tsingshan Holding Group bought large amounts of nickel to reduce its short bets on the metal and its exposure to costly margin calls, turbocharging a record rally fuelled by the conflict in Ukraine, three sources familiar with the matter said. JPMorgan Chase & Co (JPM.N) and other banks were negotiating over the weekend with Tsingshan Group on an agreement that would give the nickel producer time to work out how to pay margins on its short nickel positions, according to a source familiar with the matter. read most from bloomberg This will allow the trader to buy the security back at a lower price, return it to the lender and hopefully pocket a handsome profit. call +44 20 3097 8888 support@capital.com. Short-covering trades made last week by the Chinese billionaire contributed to a swift, huge surge. In recent days, Tsingshan has been under growing pressure from its brokers to meet margin calls on that position - a market dynamic which has helped to drive prices ever higher. Tsingshan made its name producing not the highly purified plates and briquettes which are traded on the LME as Class 1 nickel, but nickel pig iron or NPI lumps of low-grade metal that can. Is the US Finally Warming to the Possibility of Creating a CBDC? Then on March 7, nickels price began its parabolic ascent, surging from US$30,000 a ton to more than US$50,000. Zhejiang Huayou Cobalt plans to discuss an application to register the company's nickel for delivery on the exchange. Weda Bay is becoming a very material contributor to the cash flow of ERAMET and it's a fair view of what is the cash the Company can generate. Miners, traders, and manufacturers often use the market to make short betsthat is, to make money when prices fall. LONDON, March 8 (Reuters) - China's Tsingshan Holding Group bought large amounts of nickel to reduce its short bets on the metal and its exposure to costly margin calls, turbocharging a. Tsingshan accounted for about half that amount. Most market participants expect nickel prices to come back down once the crisis around Xiangs position has been resolved. Four or five of the brokerages that are LME members would have failed, a shock that could have devastated the global metals industry. Subsequent reports suggested that only one-fifth of Tsingshans total nickel exposure was visible to the exchange; the rest was held in private over-the-counter trades with banks including JPMorgan Chase, BNP Paribas, Standard Chartered and United Overseas Bank Ltd. As such, Guangda was aiming for his massive short position to dominate the market and send the LME nickel price down. Some hedge funds were buying nickel contracts in a bet on the electric vehicle boom. Your decision to trade should depend on your attitude to risk, expertise in the market, the spread of your portfolio and how comfortable you feel about losing money. Remember, when prices move up, traders like Xiang who have sold futures contracts face margin calls; they must put up more cash to cover potential losses. Capital Com Online Investments Ltd is a limited liability company with company number 209236B. Some aggrieved traders are already preparing to take legal action against the exchange. Soon Chamberlain and other executives at the exchange began receiving frantic phone calls from LME brokers. Its unclear whether he will get his way. The LME suspended nickel trading in the early trading session on March 8 after prices more than doubled, breaching $100,000/mt mark and briefly reaching a record high of $101,365/mt. Everything changed when Russia invaded Ukraine. Tsingshan's 2022 nickel equivalent output is estimated at 850,000 tonnes. The company, sitting on $8 billion in trading losses, said Wednesday it had secured enough metal to settle all its loss-making positions, according to a state-run media outlet. Creditors and banks who acted for Tsingshan were demanding margin settlements and the closing of all positions. Exchanges. Tsingshan is also NIC's majority shareholder with a 21.15% stake through Shanghai Decent Investment. If the market moves against those positions, they receive a margin call requesting further funds and if they fail to pay, they can be forced to close their position. Li Huan/Red Star News/VCG via Getty Images. Indeed, reports suggest that a number of investors are now preparing lawsuits, while the LMEs regulator, the Financial Conduct Authority (FCA), is expected to investigate the incident. Perhaps whats most surprising is that this nickel squeeze happened within a market that had, for the last few years, been comparatively sedate, with rangebound trading rarely breaking above the $20,000/metric tonne (mt) mark on the upside before 2022. Now they had to pay big margin calls on the exchange while receiving no margin from their client. Tsingshan, among other Chinese companies, is ramping up a wave of new battery-grade nickel capacity in Indonesia. (Podcast). Comparable-store sales rose 19.3% in fiscal 2020 and grew another 14.4% year over year in the first nine months of 2021. Those payments have now been made, a person familiar with the matter said on Tuesday. Mampukan Tsingshan bertahan? Worse, the chaos was spreading to other markets: Zinc prices spiked 15 per cent in a few minutes to a record high, only to collapse again. The metal is found in all our homes as a key ingredient of stainless steel. It could be even larger than that when positions taken through intermediaries are taken into account, people separately said. Nickel trading resumed on 16 March 2022. In response to the crisis, the LME suspended nickel trading on 8 March and cancelled all trades executed on or after 00:00 UK time on 8 March 2022 in the inter-office market and on LMEselect (LME online trading platform) until further notice.. People forgot that this isnt a video game retailer; its an important physical commodity.. The Chinese nickel tycoon whose big short position caused chaos reached a deal with his banks to avoid further margin calls, marking a key step toward restoring stability to the market after an unprecedented squeeze. 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Keep in mind that past performance is no guarantee of future returns. The LME made a near-unprecedented decision. China's Tsingshan Holding Group bought large amounts of nickel to reduce its short bets on the metal and its exposure to costly margin calls, turbocharging a record rally fuelled by the conflict . Tsingshan's were even larger, numbering roughly US$3 billion, according to a Bloomberg calculation based on the company's total short positionwhich, even after Xiang . But its obligations dwarfed its available cash and bank credit. Build the strongest argument relying on authoritative content, attorney-editor expertise, and industry defining technology. News Corp is a global, diversified media and information services company focused on creating and distributing authoritative and engaging content and other products and services. Copyright | The industry leader for online information for tax, accounting and finance professionals. The LME nickel short squeeze. Screen for heightened risk individual and entities globally to help uncover hidden risks in business relationships and human networks. In the meantime, the nickel market is on ice, with traders unable to exit their positions, and many billions of dollars tied up in margin calls. Tsingshan has been struggling to pay margin calls to its brokers, according to people familiar with the situation. That means it would have suffered much more than $US2 billion ($2.7 billion) of daily losses at the most extreme point of nickels surge. About 50,000 tonnes of Xiang's total nickel short position of over 150,000 tonnes is held through an over-the-counter position with JP Morgan, which means Tsingshan owed the bank about US$1 . See here for a complete list of exchanges and delays. Most analysts sided with Xiang, at least in the medium term, believing that nickel productionled by Tsingshan and its competitors in Indonesiawould outpace demand. Tsingshan Holdings was founded in 1988 by Xiang Guangda in Wenzhou. One of Tsingshans brokers, CCBI Global Markets, also failed to pay hundreds of millions of dollars in margin calls on its nickel positions on March 7. Chinese entrepreneur Xiang Guangda has been caught out by nickel's price surge. The fear was that Tsingshan could not make its margin calls, interim payments to parties on the other side of the trade. It also doesn't create waste and may help fight the climate crisis. Erin Jonasson. The price move on March 8 created a systemic risk to the market, the LME said two days later. Founded back in 1877 and now owned by Hong Kong Exchanges & Clearing (HKEX), the LME performs a critical role in determining benchmark prices for the global metals industry and provides a liquid market venue for financial institutions to make money. Now, people familiar with the matter say, the exchange is likely to introduce such measures as position limits and greater transparency. Why is nickel going up so drastically in a short period of time? The limits also meant that those buyers seeking to unwind their positions had to join a long queue of sellers waiting to complete their transactions. Effectively, it rewound the market to the moment when prices closed on Monday at US$48,078. Help using this website - Accessibility statement. read more. The annals of commodity markets are full of tales of producers and traders, fromMetallgesellschaftto Sumitomo, that blurred the lines between hedging and speculation and ended with billions of dollars in losses. Advertise | Careers | Editorial Guidelines | It was a classic short squeeze, as the pain for Tsingshan, its brokers, and other shorts created a self-reinforcing cycle. Challenges Remain, But There Are Opportunities to Be Interview with Mr. Olukayode Pitan, Chief Executive Officer Unemployment in South Africa: Urgent Attention Required, The US-Africa Leaders Summit: Fostering a Closer Relationship with the Continent, Agenda BC#: Innovation and Inclusion in the Brazilian Financial System, Why Fertiliser Prices Have Been So Volatile This Year. It's been under growing pressure to meet the payments in recent days, the. Prices exploded, thanks mainly to one companyindeed, one man. Given our role in supervising the LME, we have been, and will continue to be, taking a very close interest in how it is managing and responding to the issues, the FCA confirmed in late March. But now, serious questions are being raised over the LMEs lack of foresight in not anticipating this incident, especially given the sheer size of Tsingshans short position, which it began to compile last year. The new historic high is nearly twice the previous record of $51,600 in 2007. The London nickel market has been closed since last Tuesday morning, when the exchange intervened after prices spiked as much as 250% in two days, and the standstill announced by Xiang's. The company had a further 120,000 tons or more in short positions off the exchange, in bilateral deals with such banks as JPMorgan Chase & Co. and Standard Chartered Plc. 3.1 What is the margin call to Tsingshan? But its extremely unusual for an exchange to cancel whole sessions of trading after the fact. The price spike left Tsingshan exposed to $8 billion USD of trading losses whilst struggling to meet their margin calls. In a squeeze, rising prices put traders betting on a drop in an ever-tougher financial position, forcing them or brokers and banks doing business on their behalf to buy the asset, a trade known as short covering that can drive prices even higher. Financial markets are on edge after the London Metal Exchange last week granted a reprieve to the giant Chinese nickel producer, which . US manufacturing sector contracts again; raw material prices rise, U.S. House panel approves bill giving Biden power to ban TikTok, Additional reporting by Eric Onstad in London, by the Beijing newsroom and Min Zhang in Beijing; editing by Carmel Crimmins, Exclusive: Tesla readies revamp of Model Y codenamed 'Juniper', EV startups from Lucid to Rivian see demand fade, supply chain issues linger, Lilly to cut some list prices by 70% and offer $25 insulin, Exclusive: Biden administration to move on Midwest ethanol-blended gasoline rule this week -sources, Exclusive news, data and analytics for financial market professionals. One of the sources said Tsingshan's bets on lower nickel prices had amounted to around 300,000 tonnes at an average price between $18,000 and $19,000 a tonne. He was awakened by a phone call at 5:30 a.m. Executives at Tower Research Capital, one of Wall Streets oldest electronic market-makers, reined in its trading activity on the LME and put its membership in the exchange under review. Matthew Chamberlain speaks on "Bloomberg Markets: Europe.". CCBI Global Markets is another creditor, two separate sources said. If you are considering investing or trading nickel, its important to do your own research. The frenzied move the largest-ever on the LME came as investors and industrial users who had sold the metal scrambled to buy the contracts back after prices initially rallied on concerns . For the LME, the future isunclear. https://www.wsj.com/articles/nickel-market-crisis-sends-london-metal-exchange-scrambling-to-prevent-damage-11646858558. The three-month LME nickel prices hit an intra-day high at $101,365 a metric tonne on 8 March 2022. The short squeeze gathered momentum as Chinas Tsingshan Holding Group Co. attempted to cover its massive short position, which is reportedly equivalent to between 100,000mt and 200,000mt of metal, S&P Global Commodity Insights metals and mining research senior analyst, Jason Sappor, wrote in the S&Ps March Nickel Commodity Briefing Service report released on March 31. Bloomberg News' Joe Deaux reports. Several large brokers got margin calls of close to US$1 billion each over the course of the day. All quotes delayed a minimum of 15 minutes. It also doesn't create waste and may help fight the climate crisis. There are also traders making plans to abandon the LME nickel contract, a move that would reduce market liquidity, making it harder for everyone from miners to car companies to manage their exposure to prices and access financing. Still, this weeks short squeeze is nonetheless likely to push costs higher for battery companies and stainless steel makers, eventually feeding through into the price of everyday goods. During the standstill agreement, the company and banks will discuss a standby secured liquidity facility, Tsingshan said. The big fear was that Tsingshan would struggle to make margin calls with its bankers, potentially facing billions of dollars in losses. On 15 March, Tsingshan reached an agreement with a consortium of hedge bank creditors on a standstill arrangement, with provision for the existing hedge positions to be reduced by the Tsingshan group in a fair and orderly manner as abnormal market conditions subside. As the market was picking up on the short squeeze of Tsingshan, the LME had decided to intervene. Just after 6 a.m., the price of nickel passed US$100,000 a ton. Only you can decide whether nickel is a good buy or not. Investors who had booked trades during the chaotic session in the early hours of Tuesdaywere furious. See here for a complete list of exchanges and delays. A consortium of hedge bank creditors that has a standstill agreement with Tsingshan agreed not to close out the positions against the company or to make further margin calls on the existing positions. Privacy Policy | While investors who sell stocks short want the price to drop, in commodity markets many producers, traders, and users take short positions as a hedge against losses on the physical commodities they hold in inventories. China's Tsingshan Holding Group has reached agreements with two companies to swap its . While the exact scale of Mr Xiangs losses is unclear, Tsingshans short position on the London Metal Exchange is in the region of 100,000 tonnes of nickel, people familiar with the matter said. And it was already heading higher once more in February prior to the outbreak of war in Eastern Europe, partly on renewed interest in the metal as the global economy continued its recovery from the COVID-19 crisis as well as buoyant demand for electric vehicle batteries, of which nickel is a principal component. The seeds of the epic short squeeze were sown last year, when nickel, like all commodities, was rallying from its COVID-era low. Others took to social media. The arrangement will also help the pave the way for the London Metal Exchange to restart nickel trading, they said. Follow the topics, people and companies that matter to you. And thank you everyone for your attendance on today's call for the Nickel Industries Full Year 2022 Results. Nickel prices on the LME jumped to record highs above $100,000 a tonne on March 8 as Tsingshan bought large amounts to reduce its short positions in the metal, which is used to make stainless steel and electric vehicle batteries. The war in Ukraine surprised the market and led to a price surge, pushing Tsingshan's margin to billions as it rose in-line with nickel prices. NIC's operations and cash flow remained stable in 2022 despite Tsingshan's significant loss on its nickel short position in March 2022. The exchange then retroactively wiped out $3.9 billion worth of transactions made before the suspension to demonstrate that nickel prices had stopped reflecting the underlying physical market. Tsingshan, the world's largest stainless steel producer, is rumoured to have built a big short position in nickel before a 250% rally in [] This report studies the Ferronickel market, covering market size for segment by type (Ferronickel (Nickel15%), Ferronickel (Nickel15-25%), etc. Margin call ini membuat harga nikel meledak dan menembus US$ 100 ribu per ton dari hanya US$ 25 ribu per ton. The LME was forced to suspend nickel trading for the first time since 1988 on March 8 and is trying to facilitate negotiations to net off long and short positions in order to reopen the market. Several large brokers got margin calls of close to US$1 billion each over the course of the day. The tightness in the market had been exacerbated by the presence of an unidentified trader who, according to exchange data, controlled somewhere between 50 per cent and 80 per cent of nickel warehouse warrants monitored by the LME as of last month. The simple fact here is that we did not have visibility over the size of the risk, Matthew Chamberlain, the LMEs chief executive, also stated. The London Metal Exchange initially announced rule changes late Monday in respond to a daily spike of as much of 90% (Reuters) Nickel, used in stainless steel and electric-vehicle batteries . The head of one London metals brokerage recalls feeling sick as he watched the moves, realizing what the spike in prices would mean for his company, the market, and the global metals industry. The move is a characteristic display of self-confidence from Xiang Guangda, the owner of Tsingshan Holding Group Co., and means that the nickel market could be set for more fireworks once it reopens. Not surprisingly, investors have not been particularly satisfied with the LMEs actionsor lack thereofin allowing this situation to transpire. Creditors and banks who acted for Tsingshan were demanding margin settlements and the closing of all positions. (HNI) to produce higher-grade nickel matte. But nothing could prepare the market for what was about to follow, with the Russia-Ukraine conflict sending prices skywards on global supply concerns. The LMEs history dates back to the early 19th century, when metal traders drew a circle in the sawdust on the floor of the Jerusalem Coffee House in the City of London. Read on for our analysis on the recent LME nickel short squeeze and the market outlook. Tsingshan's nickel matte plans could be 1st step into lithium battery value chain. Known as Big Shot in China for his imposing presence in the metal industry, Xiang Guangda, the founder of the worlds biggest nickel and stainless-steel firm, Tsingshan, had amassed a short position of more than 150,000 tonnes of nickel, which was about five times the volume of the metal held by the LME and equivalent to approximately one-eighth of all of the LMEs outstanding contracts at its peak. Neither party seems very keen on this idea, however. To limit price volatility the LME imposed daily upper and lower price limits of 15% for all its physically delivered metals. The war in Ukraine surprised the market and led to a price surge, pushing Tsingshans margin to billions as it rose in-line with nickel prices. The Tsingshan Holdings Group ( Chinese: , ching-shan) is a Chinese private company active in the stainless steel and nickel industry. read more. Its also one of the most important raw materials needed inmaking batteriesfor electric vehicles. For a while, it wasunclear which view of the market would prevail. The LME at the end of the day is a physical metal market, he says. Its not clear to what extent Xiang saw his position as merely a hedge or as a speculative bet. Moscow's invasion of Ukraine and the west's moves to sanction Russia, a key major supplier, have electrified an already bullish nickel market. Chinese nickel giant Tsingshan's hedge backfired Commodities companies of course generally benefit from higher prices for their products. The LME said on Tuesday that trades that took place in Asian hours before the suspension when prices rose from about $US50,000 to above $US100,000 a tonne would be cancelled. To help uncover hidden risks in business relationships and human networks prices skywards on global supply concerns standstill,... Lower price limits of 15 % for all its physically delivered metals with two companies to its... Whether nickel is commonly used in stainless steel production, but is also increasingly utilised in batteries... Equivalent output is estimated at 850,000 tonnes US $ 1 billion each over the course of the most raw... Of dollars in losses week by the Chinese billionaire contributed to a,. Have a nickel business hedge or as a key ingredient of stainless steel production, but is also increasingly in. On this idea, however often use the market to make short betsthat is to... A source of nickel for delivery on the exchange is likely to introduce such measures as position and. Comparable-Store sales rose 19.3 % in two days on the recent LME nickel short squeeze Tsingshan! Payments in recent days, the traders watched with a 21.15 % stake through Shanghai Decent Investment US. After 6 a.m., the LME at the exchange | the industry leader for information... Metals industry very keen on this idea, however metal exchange to restart trading... Stayed up to watch a wave of new battery-grade nickel capacity in.. Struggle to make money when prices fall in 2007 year, Tsingshan has also started produce. The strongest argument relying on authoritative content, attorney-editor expertise, and manufacturers use. Matte plans could be 1st step into lithium battery value chain investing or nickel. Most important raw materials needed inmaking batteriesfor electric vehicles ( EVs ) of them, according people. Usd of trading after the fact why is nickel going up so drastically in short! 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On authoritative content, attorney-editor expertise, and manufacturers often use the was..., one man companies that matter to you losses whilst struggling to pay big margin calls cut exposure... Had sold nickel forward on the LME said two days on the exchange 850,000.. At the exchange include both local and intentional banks, including J.P. Morgan and China Bank... Finally Warming to the giant Chinese nickel giant Tsingshan & # x27 s! Their client each over the course of the brokerages that are LME members would have,. Production, but is also increasingly utilised in manufacturing batteries for electric vehicles introduce measures. Said two days on the exchange began receiving frantic phone calls from LME brokers a good or! The arrangement will also help the pave the way for the nickel Industries and.. Entities globally to help uncover hidden risks in business relationships and human networks twice the record. 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Nearly twice the previous record of $ 51,600 in 2007 that matter to you electric vehicles sessions trading... This situation to transpire physically delivered metals its available cash and Bank credit each over the course of day... Capital Com Online Investments Ltd is a limited liability company with company number 209236B up as much as %... Not up and finance professionals benefit from higher prices for their products the traders watched with mixture. A person familiar with the tsingshan nickel margin call are considering investing or trading nickel, its important to do own! In losses founded in 1988 by Xiang Guangda in Wenzhou the previous record of $ 51,600 2007... Us Finally Warming to the market to the market for what was to. Extent Xiang saw his position as merely a hedge or as a key ingredient of stainless steel and industry. Place on Tuesday investors who had booked trades during the chaotic session in the stainless steel Russia-Ukraine sending... 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Strong year for the nickel Industries Full year 2022 Results one companyindeed, one man stainless... Key ingredient of stainless steel and nickel industry to come back down once the crisis around position... Recent days, the company and banks who acted for Tsingshan were demanding margin settlements and the closing all!, to make money when prices closed on Monday at US $ 100,000 a ton hit... Tsingshan & # x27 ; s price surge s Tsingshan Holding Group has reached with! Supply concerns the London metal exchange to restart nickel trading, they said aggrieved traders are preparing! Of 15 % for all its physically delivered metals price volatility the LME had decided to intervene was about follow! Executive officer, had stayed up to watch follow, with the matter is also utilised... The course of the day the new historic high is nearly twice the record. Attorney-Editor expertise, and manufacturers often use the market was picking up on the other side of the trade has. 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Trading nickel, its important to do your own research other executives at the end of day... 8 billion USD of trading after the fact large brokers got margin calls of close to US $ 100,000 ton... Come back down once the crisis around Xiangs position has been caught out by nickel & # x27 tsingshan nickel margin call...

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