Nickel premiums climb in Shanghai on price gap, new futures contract

Premiums for imported nickel in China rose quickly this week on positive arbitrage and buying ahead of the launch of the new nickel futures contract in Shanghai.

On Thursday March 19, refined nickel of 99.8% purity was trading at $120-150 per tonne on a cif Shanghai basis. The mainstream level was at $131 per tonne, compared with $103 per tonne last week.

Traders mentioned rising demand for nickel in the week after it became profitable to import the metal.

“One can now make a profit of about 1,000 yuan per tonne by importing one tonne of nickel – a scenario that hasn’t been seen for quite a while, as importing nickel before led to losses,” a major dealer said.

“Local spot demand is not good, and it is not easy to sell to final users. It is largely just arbitrage activity – although it is also positive for those importing for financing purposes,” another dealer said.

The launch of the SHFE nickel futures contract on Friday March 27 is also boosting demand.

“People are buying nickel on expectations that prices will rise after the launch of the futures contract, as traditionally new contracts boost the prices of the underlying metals,” a third dealer said.

But some market participants are still waiting to see which brands the SHFE accepts for delivery.

“There are still uncertainties, and we are waiting for the SHFE to clarify what brands can be used for delivery,” the dealer said.

Nevertheless, as of Thursday, some traders had started hoarding in hopes of higher premiums later on.

Chinese market participants are also closely watching a possible delisting of Malaysian warehouses by the London Metal Exchange, although "all in all, the price comparison is the most important factor for us when deciding on whether to import nickel or not", the first dealer said.

Linda Lin

Linda Lin


Linda Lin

March 19, 2015

06:25 GMT