SHFE’s runaway nickel contract adds depth and liquidity to LME’s price

The launch of nickel futures trading on the Shanghai Futures Exchange (SHFE) has led to an increase in liquidity and volumes on the London Metal Exchange as a result of arbitrage between the two markets, traders told Metal Bulletin.

Launched on March 27 this year, the SHFE nickel contracts have become the second most actively traded on the Chinese exchange after copper, and the parallel increase in depth on the LME’s nickel contract, alongside tighter spreads, have captured the attention of traders around the world.
Since March, the SHFE has raised warehouse capacity for nickel to 70,000 tonnes from 40,000 tonnes, and a total of nine brands have been approved for SHFE delivery, including six local ones and three from Norilsk. This now makes it a more widely accessible contract than it was when it first launched.
Chinese futures companies and funds, as well as foreign companies that have wholly-owned subsidiaries in China, can trade on the exchange through domestic brokers.

By the end of October, SHFE nickel trading volumes totalled 85 million lots, with a turnover of 7.6 trillion yuan ($1.2 trillion). The alloying metal...

Published

Fleur Ritzema

Ellie Wang

November 17, 2015

10:35 GMT

London, Shanghai