FOCUS: What SHFE briquette deliverability means for oversupplied nickel market

The global nickel market continues to suffer a disconnect between on-exchange activity and market fundamentals, with the appetite for physical material distinctly lackluster, while speculative sights are set firmly on the electric vehicle (EV) battery revolution.

Shanghai Futures Exchange nickel prices continue to be volatile despite stagnating stainless steel and EV demand for nickel because of the Covid-19 pandemic.
The arbitrage between the SHFE and the London Metal Exchange remains negative, having been closed since May, with some analysts pointing to a disconnect between the two – the SHFE’s open interest has increased by 18% since March while the LME has seen a reduction of 10%.
“There is definitely a disparity in sentiment between on and offshore, which has been staggering - open interest suggests that flows on the SHFE and LME have been completely divergent since the end of March,” Citi analyst Oli Nugent told Fastmarkets.

“Speculative and physical buying in China have led to short covering on the LME, [with] investor inflows... very [much a] Chinese driver until the LME caught up through June/July [when] risk-sentiment improved for ex-China traders. And, as expected, that...

Published

Amy Hinton

Sally Zhang

July 09, 2020

17:28 GMT

London, Shanghai