On June 5, immediately after the second batch of 16 million metric tons of steel futures contracts expired, Li Yi submitted an application for physical delivery to the exchange, initiating his second squeeze.
Faced with this squeeze, both Sheffield Company and the Sassoon family felt a sense of despair.
The previous 12 million-plus tons of physical steel had essentially depleted their entire inventory; they had even been forced to tap into the Sassoon family’s extensive connections just to barely scrape together the physical steel required for delivery.
Although they had been actively gathering physical steel afterward, Sheffield Steel was far from the only steel company facing an excess of short positions; nearly all steel companies were now facing the crisis of a short squeeze by long positions.
Consequently, competition in the market for rebar and channel steel that meets delivery standards has become extremely fierce; often, even with money, it is impossible to purchase them.
Even with Sheffield Steel Company’s all-out efforts to acquire steel during this period, they have managed to procure less than 2 million tons—still a long way short of the 16 million tons currently needed.
Although they have already sought assistance from the largest steel company in North America, and the other party has agreed to mobilize 10 million tons of steel for them, that’s like trying to put out a fire with water from a distant source!
After all, shipping over 10 million tons of steel from North America to the British Isles would take several months—and Li Yi, who is clearly aiming to force a market crash, would never agree to wait that long.
Left with no other choice, the exchange had to step in to mediate.
After confirming that Sheffield Steel was indeed unable to fulfill physical delivery, the exchange had no choice but to convene both parties for negotiations, hoping to broker a settlement.
The exchange had no choice; after all, once Sheffield Steel confirmed it could not deliver, the exchange would be held responsible for these long positions.
Typically, they have two options: one is to purchase steel from the market to deliver to the long positions, and the other is to buy back the expired contracts from the counterparties at market prices.
Regardless of the approach, the exchange would suffer significant financial losses.
Although they could seek recourse from the defaulting Sheffield Steel Company through established procedures—and even impose fines—whether they would actually recover the funds remained an unknown.
If the shareholders behind Sheffield Steel completely abandon the company, or if the company becomes insolvent and files for bankruptcy, the money the exchange pays out to the long positions could be lost. banbanhaobang
This is precisely why the exchange hopes both parties can reach a negotiated settlement!
If negotiations are successful and the defaulting short sellers step forward to resolve the issue themselves, the exchange will not need to advance the funds.
Li Yi did not refuse the negotiations initiated by the exchange.
Although his goal was to force Sheffield Company into bankruptcy, his primary objective was to make the Sassoon family behind the company pay the price.
If Sheffield Company were to go bankrupt now, the people running the company would likely transfer the company’s funds while filing for bankruptcy.
It must be noted that over the past few months, Sheffield Company has recouped at least four to five billion pounds by liquidating short positions. If that money were to be siphoned off, the price the Sassoon family would pay would be far too small.
He not only wanted to force Sheffield Steel into bankruptcy, but also wanted them to hand over all their funds.
After three days of negotiations, Li Yi’s side ultimately chose to “compromise,” no longer demanding physical delivery from Sheffield Steel but switching to cash settlement instead.
However, Sheffield Steel didn’t come out ahead either; they had to buy back the contracts at a price 15% above the market rate.
Based on this price, Sheffield Steel would have to pay £388.70 per ton to redeem the expired contracts held by Li Yi and his group.
For the 16 million tons of short positions held by Li Yi alone, Sheffield Steel would have to pay a staggering 6.22 billion pounds.
When combined with the redemption of contracts held by other companies, Sheffield Steel had to pay out nearly £7 billion in a single week in early June.
This money not only completely drained Sheffield Steel, but also dragged down the Sassoon family behind it; they, too, were forced to foot the bill for Sheffield Steel’s actions to the tune of 2 billion pounds.
Fortunately, Sandy, the head of Sheffield Steel, had received word from his brother on the front lines that the Imperial forces had captured Stanley, the most important city on the Falkland Islands, on the 13th, and had surrounded nearly 10,000 Argentine soldiers in a small area.
Now the Argentine soldiers were beginning to waver and grow despondent, and their supreme commander, Major General Menéndez, was already negotiating the terms of a conditional surrender with them. Barring any surprises, news of the Empire’s complete recapture of the Falkland Islands would reach the homeland within a day or two.
The war will certainly be over by the end of the month.
This is absolutely tremendous news for the beleaguered Sheffield Company and the Sassoon family.
Once news of the war’s end arrives, steel prices will inevitably plummet—there is no doubt about that.
At that point, they would only need to spend a little more money to redeem the remaining tens of millions of short contracts.
Although losses were inevitable, as long as Sheffield Steel did not go bankrupt, the company’s shareholders could still accept this outcome.
And this was the fundamental reason why the Sassoon family was willing to go to such great lengths to save the Sheffield Company; put simply, this largest steel company in the Empire still held value for them.
And things indeed unfolded exactly as they had anticipated. Just one day later, good news arrived from the front lines: Imperial forces had successfully captured Puerto Stanley!
On June 14, 10 Downing Street released another stunning announcement: the Argentine garrison commander had surrendered to Major General Moore of the Royal Marines, and the 9,800 besieged Argentine soldiers were taken as prisoners of war.
In addition, 4,167 Argentine soldiers were repatriated to Argentina aboard the ocean liner HMS Canberra.
With the capture of Port Stanley by frontline troops, Imperial forces had gained complete control of the Falkland Islands, and the outcome of the war was now beyond doubt!
When the news reached the homeland, the entire British Isles erupted in jubilation; everyone took to the streets to celebrate the Empire’s victory.
It must be remembered that over the past two hundred years, the British Empire had conquered one nation after another with its superior ships and artillery, remaining virtually invincible and undefeated in battle.
At its peak, the Empire’s territory spanned nearly half the globe—India, Australia, New Zealand, Cyprus, Jamaica, Uganda… all were its colonies.
However, after the end of World War II, the Empire’s power rapidly declined, its colonies gained independence one after another, and the Empire’s glory faded day by day!
The victory in the Falklands War allowed the people of the British Isles to once again feel the Empire’s strength and see hope for its resurgence.
Upon hearing this news, the entire stock and futures markets were shaken once again; everyone knew that the countdown to war had begun.
In an instant, defense stocks, various metal futures, and commodity prices once again plunged into a rapid decline.
This naturally included steel, and long positions holding short contracts could no longer sit idly by; they rushed to sell their contracts to cash out.
At this point, Sheffield Steel Company secured a £1.5 billion bank loan using its shares as collateral, intending to take advantage of the falling steel prices to buy back a large number of short contracts and completely quell this squeeze crisis.
But just then, mainstream media outlets—including The Times and the Oxford Gazette—dropped another jaw-dropping bombshell.
The headline read “The Steel Crisis of Overcapacity.” The report was an investigative piece targeting not just Sheffield Steel, but the smelting industry across the British Isles and indeed all of Europe.
According to the report, after eight consecutive years of steel overcapacity, domestic steel companies—whether in the British Isles or elsewhere in Europe—have been pushed to the brink of survival.
To survive, they have been forced to implement measures such as layoffs, pay cuts, and production cuts to reduce corporate expenses.
Take the top five steel companies in the British Isles as an example: their production capacity has fallen to half of what it was at its peak, and some companies have even been reduced to just one-third of their former capacity. Over the past two years, the nation has been relying entirely on previously stockpiled steel.
Previously, with the international situation stable, these issues were effectively concealed. However, due to the impact of this war, the problem of insufficient production capacity at some companies has been laid bare, suddenly tearing away the veil of concealment.
The report concludes with a bold prediction: the British Isles—and indeed all of Europe—are about to face a massive steel crisis!
As this report gained traction, undercurrents began to stir once again in the London futures market…
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