Exclusive-Shanghai exchange exploring potential LME nickel rival


(c) Reuters. FILE PHOTO A company logo for Shanghai Futures Exchange was displayed at a stand during LME Week Asia, held in Hong Kong on June 14, 2016. REUTERS/Bobby Yip

By Siyi Liu, Pratima Desai and Julian Luk

BEIJING/LONDON (Reuters) -The Shanghai Futures Exchange (ShFE) is looking into the possible launch of nickel futures for international use, a potential challenge to the London Metal Exchange’s (LME) contract, five sources with knowledge of the matter told Reuters.

One of the sources said ShFE has been studying the structure of the nickel market and supply and demand at the instigation of industry participants looking for alternatives.

LME prices have been used as a global benchmark by commodity traders, producers and consumers using nickel to manufacture stainless steel and, more recently, electric vehicle batteries.

But market confidence was shaken by a trading debacle in March 2022 that rocketed nickel to a record above $100,000 a metric ton, leading many users to abandon the LME. REUTERS/Bobby Yip

By Siyi Liu, Pratima Desai and Julian Luk

One of the sources said that ShFE has been studying the structure of nickel market as well as supply and demand at industry participants’ instigation.

But market confidence was shaken by a trading debacle in March 2022 which rocketed nickel to astronomical levels above $100,000 metric tons.

This led many users to abandon LME because they were re The crisis has caused the average daily LME nickel volume to plummet. Although trading volumes have improved since January of last year, they are still almost half lower than in January 2011. Sources said that ShFE would offer nickel contracts to international firms on its International Energy Exchange, or INE, where commodities like rubber and rubber are traded using yuan. ShFE is consulting the industry. No final decisions have been taken on when a nickel future could launch on the INE or what the contract specification might be, the sources said.

However, two of the sources said ShFE was looking at nickel briquette, pressed metal powder, as a material that could be delivered against any new INE contract. Nickel briquette, cathode and pellet are deliverable against the LME’s contract.

CME Group (NASDAQ:) is also looking to launch a nickel contract that would settle against prices gathered from a platform to be launched by British-based Global Commodities Holdings (GCH).

CME did not respond to a request for an update on its plans for a nickel contract.

“The platform and systems are all in place and ready to go,” GCH said. The final stage is the onboarding of new members, which includes KYC (know-your-client) checks. “

In Singapore, Abaxx, a new commodities exchange is aiming to launch a nickel sulphate contract, the world’s first for a type of nickel used to make the lithium-ion rechargeable batteries that power electric vehicles.

ShFE’s INE launched a physically deliverable copper contract in 2020, an attempt to allow the domestic market to exert more influence over prices of the metal used in the power and construction industries.

But liquidity of the INE copper contract is low and to boost volumes and liquidity, warehouse stocks are needed. Reuters reported that ShFE was looking to expand its warehousing outside China. 01001010